The surge in equity markets has led to investors pulling out revenue from the open-ended equity schemes in November. Data from Association of Mutual Funds in India (Amfi) showed that equity funds saw record net outflows of Rs 12,917.36 crore in November. Equity funds have continued to see net outflows due to the fact July as investors continued to book income with equity markets touching new highs.
Overall, the sector saw net inflows of Rs 27,194.15 crore in November, even though the net asset beneath management (AUM) stood at Rs 30 lakh crore at the finish of the month. However, open-ended, debt-oriented schemes saw net inflows of Rs 44,983.84 crore in the month beneath consideration. While liquid and overnight funds saw net outflows, categories such as low-duration, quick-duration, corporate bond and banking and PSU funds saw net inflows.
Market participants are of the opinion that investors who had noticed their gains wiped off in March had been removing the revenue from equity schemes. Sunil Subramaniam, MD at Sundaram Mutual stated, “At the ground-level, we have seen ‘V’ shape recovery have started in the economy. But even now the gross domestic product (GDP) is in negative. So, on the economic front, a lot of people feel that things are not yet fine. But at the same time markets have been behaving unusual and with markets at high — many investors have booked profits in the markets.” In November Sensex and Nifty had been up by 11.45% and 11.39%, respectively.
In the final 5 months, open-ended equity schemes have noticed net outflows of Rs 22,856.68. In August, equity schemes had noticed net outflows of Rs 3,999.62 — the highest recorded by them due to the fact September 2010.
Even the inflows into the systematic investment plans (SIPs) saw a dip in November. The inflows via SIP stood at Rs 7,302.16 crore in November compared to Rs 7,799.98 crore in October. “There is a drop of roughly Rs 500 crore in SIPs and I think there is nothing to worry because last three days of November were holidays. We have seen that large number of people have SIPs registered on those days, so the money will get accounted in December,” stated N S Venkatesh, chief executive of Amfi.
However, marketplace players think that lots of investors are not renewing their SIPs, which they could have began 3 years ago due to the reduced returns. “Three-year SIPs would have been maturing now and today it wouldn’t have given investors much returns in mid- and small-cap schemes, so they are taking their money away,” added Subramaniam. Data from Value Research revealed that in the final 3 years, on an typical, mid-cap and tiny-cap funds had offered returns of 4.42% and .84%, respectively.
In November, all categories in the open-ended equity schemes saw net outflows. Large-cap funds saw outflows of Rs 3,289.18 crore, followed by multi-cap funds, which also saw net outflows of Rs 2,842.08 crore in November. Officials in mutual fund sector also believed that some revenue from equity would have even moved to true estate or direct equity in the final couple of months.
“All of these outflows would not have gone completely out of equities as an asset class, but probably moved to direct equities as investors have had some successes in past few months investing directly. Some part of this liquidity could have also flown to real estate with renewed interest amongst genuine buyers wanting to own home at lower interest rates and falling taxes and prices. There are also investors who would be sitting on cash to deploy once again post any meaningful correction in near future,” stated Akhil Chaturvedi, associate director & head of sales at Motilal Oswal Asset Management Company.