The run-up in the markets seen in September has prompted mutual fund (MF) investors to take money off the table, leading to a dip of 27 per cent in equity flows compared to the previous month.
“It is typical for investors to look for exits, if their investments have been below water for one to one-and-a-half years. In September, redemptions have gone up and inflows have come off,” said Aashish Sommaiyaa, managing director and chief executive officer (CEO) of Motilal Oswal Asset Management Company (AMC).
In September, net equity inflows stood at Rs 6,609 crore, compared to Rs 9,152 crore in the previous month, showed data from the Association of Mutual Funds in India (Amfi).
In the last four months, this is the lowest net inflow tally seen by the equity category. “Balanced category alone has seen nearly Rs 2,000 crore of outflows,” Somaiyaa added.
In terms of overall redemptions, investors pulled out Rs 9,444 crore of funds from the equity category, which was 22 per cent higher than the previous month.
Contribution through the systematic investment plans or SIPs remained intact at Rs 8,262 crore, improving marginally from last month’s tally of Rs 8,231 crore. If large parts of these SIP flows (as anecdotally observed) are directed towards equity schemes, they account for 51 per cent of gross equity inflows (Rs 16,053 crore) seen in September.
Among equity categories, large-cap funds received net inflows of Rs 1,559 crore, which was about 40 per cent lower than the previous month.
In September, the market benchmark had delivered robust returns of 3.8 per cent. However, markets saw sharp swings during the month. Following sell-off in the markets on account weak economic growth data and fears of spike in crude oil prices, the markets saw a complete turnaround after Finance Minister Nirmala Sitharaman announced cuts in corporation tax on September 20.
The markets witnessed over 5 per cent gains on the day of the announcement, followed by a 2 per cent jump in the next trading session.
On the fixed-income space, liquid schemes saw net outflows to the tune of Rs 1.4 trillion. According to industry observers, this was largely on account of quarter-end pullouts made by institutional investors and corporate investors. “Corporates take out funds for meeting their tax-related obligations and redemptions made by banks are related to their capital adequacy requirements,” said NS Venkatesh, chief executive of Amfi.
Outflows in credit risk funds showed no signs of easing. In September, investors pulled out Rs 2,351 crore. So far this fiscal, the category has seen net outflows of Rs 16,133 crore.
“Credit risk category could see the pace of outflows even accelerate as there is still nervousness around rating downgrades,” said Mahendra Jajoo, head-fixed income of Mirae Asset Management Company.
Most of the debt categories saw outflows. Other categories with large drawdowns were ultra-short duration funds (-Rs 6,783 crore), money market funds (-Rs 6,278 crore) and low duration funds (-Rs 2,131 crore).
“Outflows from other debt categories can also be attributed to the quarter-end withdrawals the industry tends to see from institutional and corporate investors,” Jajoo added. Overall, the debt category saw net outflows of Rs 1.58 trillion, largely driven by investor pullouts in liquid schemes. At the end of September, industry assets under management stood at Rs 24.5 trillion, four per cent lower than the previous month.