You are here: Home » Markets » Mutual Funds
Business Standard

MFs withdraw Rs 14,300 cr in October; rebound least expected in 2020

During January-May 2020, mutual funds (MFs) made a net investment of more than Rs 40,000 crore in stock markets

Mutual Fund | mutual fund sector

Press Trust of India  |  New Delhi 

tax, fund, MF, mutual fund, credit, borrowers
This has taken the total outflow to Rs 37,498 crore from equities since June.

pulled out a massive Rs 14,300 crore from equities in October, making it the fifth consecutive month of withdrawal, as fund managers sold stocks to meet redemption requirements.

During January-May 2020, (MFs) made a net investment of more than Rs 40,000 crore in stock markets, data available with the Securities and Exchange Board of India (SEBI) showed.

Pranjal Kamra, CEO of Finology said, one of the primary reasons for the withdrawal was that continuous outflow was being observed in equity through redemption by investors amid concern over the US election and slowdown in the domestic economy.

Moreover, during the September quarter, equity-oriented mutual funds witnessed an outflow of over Rs 7,200 crore and also there was a drop in inflow from the systematic investment plan (SIP) folios.

Another reason for withdrawal could be profit booking in some of the spaces, and the need to increase their cash holding as the outlook remains uncertain, Kamra said.

"The numbers (outflow) we are seeing are mostly the result of fund managers selling to meet redemption requirements," said Harsh Jain, co-founder and COO at Groww.

Jain further added that "this is a common behaviour seen in times of uncertainty. When the recover after a crash, investors tend to withdraw when they reach break-even."

According to the data, MFs pulled out Rs 14,344 crore from equities in the month of October. This has taken the total outflow to Rs 37,498 crore from equities since June.

Individually, MFs withdrew Rs 4,134 crore in September, Rs 9,213 crore in August, Rs 9,195 crore in July and Rs 612 crore in June.

However, they had put in a net sum of over 40,000 crore in the first five months of the year (January-May). Of this, Rs 30,285 crore was invested in March.

Nilesh Shetty, fund manager at Quantum AMC, said withdrawal could be due to investors who had seen significant losses in their net asset value (NAV) after the market crash in March and are exiting their investments after the recovery in NAV.

Going ahead, Finology's Kamra said with less than two months remaining for 2020 to get over, a rebound is least expected.

"However, with the end of the financial year nearing and turning sentiment of the market towards positive, growth in inflow may be on the cards," he added.

Prateek Mehta, co-founder and chief business officer of Scripbox, said there is some stability that has been seen in Indian lately. However, the entire impact of COVID-19 has not been completely understood and hence, cannot be priced in.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, November 08 2020. 13:05 IST