The mutual fund (MF) industry saw a 9 per cent dip in equity inflows in October, slipping to a five-month low at Rs 6,026 crore, as investors took money off the table with the markets showing signs of recovery.
“We saw redemptions as investors looked at booking profits. However, it is not surprising to see some outflows, with markets bouncing back,” said Radhika Gupta, chief executive officer of Edelweiss MF. In October, investor redemptions stood at Rs 11,047 crore, which was 17 per cent higher than September.
However, if the collection made by the two newly-launched thematic equity schemes is excluded, the decline was much sharper at 19 per cent. Adjusting for the new scheme launches, equity flows in October stood at Rs 5,350 crore.
“Equity flows might see a stronger dip, unless there is a more broad-based rally, supported by improvement in economic indicators,” said Jimmy Patel, CEO of Quantum MF.
Compared to the last 12-month average of Rs 7,016 crore, October equity flows were 14 per cent lower. Contribution through systematic investment plans, or SIPs, stood at Rs 8,246 crore, marginally lower than the previous month.
The markets have seen a strong upturn after seeing selling pressure in early October, following concerns over weak economic growth.
The Sensex has gained nearly 7 per cent in October from its low point.
Among broader market indices, the BSE Midcap has gained 8.6 per cent during the same period, while the BSE Smallcap has seen returns of 6.6 per cent.
Experts say there can be continued exits from equity schemes unless sentiment on broader economic recovery improves.
On the debt front, liquid funds saw net inflows of Rs 93,200 crore in October, after seeing outflows of Rs 1.4 trillion in previous months.
Exchange traded funds (ETFs) saw a significant jump in flows in October. From Rs 1,521 crore of inflows in previous months, the flows towards ETFs jumped fourfold to Rs 6,682 crore.
According to industry observers, the jump in ETF flows was on account of funds from Employees’ Provident Fund Organisation (EPFO) coming into the EPFO-appointed fund houses. At present, the EPFO is only allowed to make equity investments through passively-managed ETFs.
At the end of October, overall industry assets under management stood at Rs 26.32 trillion, which was 7.4 higher than previous month.