Equity mutual fund outflows slower in September, debt funds see inflows

Distributors believe amid the pandemic, some investors believe valuations are high and cannot be sustained and are redeeming money from equities to enter at lower levels.

Equity mutual funds saw outflows for the third consecutive month as investors withdrew Rs 734 crore in September, although the pace of withdrawals moderated after high-frequency data from consumer-facing industries pointed to a broader revival tightly knit to the stagegated unshackling of the economy.

Around Rs 4,000 crore was withdrawn in August and Rs 2,480 crore in July. Inflows through systematic investment plan (SIPs) stood at Rs 7,788 crore, marginally down from Rs 7,791 crore in August.

“Redemptions continue but they are peaking,” says Swarup Mohanty, CEO, Mirae Asset Management.

Distributors believe amid the pandemic, some investors believe valuations are high and cannot be sustained and are redeeming money from equities to enter at lower levels.

“The 7% fall in the markets in the third week of September would have led to reactionary redemptions from some mutual fund investors,” says Gautam Kalia, head- investment solutions, Sharekhan by BNP Paribas.

Within equities, multi-cap funds saw the highest outflows of Rs 1,144 crore followed by large caps at Rs 576 crore. Passive Index funds most of which are large-cap oriented and have low cost saw inflows of Rs 398 crore. Small cap funds saw inflows of Rs 133 crore. ELSS schemes saw outflows of Rs 29 crore and thematic funds saw inflows of Rs 25 crore. Fund of funds investing overseas markets saw inflows of Rs 1,520 crore, aided by the NFO of Axis Global Equity Alpha Fund of Fund.

Balanced hybrid funds and dynamic asset allocation funds too saw outflows of Rs 2,004 crore and Rs 244 crore respectively. Arbitrage funds saw outflows of Rs 1,732 crore, as annualized returns fell below 3%.

Distributors point out on the fixed income side, flows have started coming back in duration categories with short duration and medium duration getting good flows, after some time. “Risk aversion is waning in debt funds and now investors are moving to categories where yields are high,” says Alok Agarwala, chief research and investment officer, Bajaj Capital.

With bank deposits paying a maximum of 5-5.5%, investors are scouting around for debt schemes which can pay a little more and give them the added advantage of indexation after three years. “There appears to be a preference for schemes with good credit quality which can offer reasonable returns,” says G Pradeepkumar, CEO, Union Mutual Fund.

Liquid funds saw outflows of Rs 65,952 crore as corporates withdrew to pay Advance Tax. Among debt funds, money came into short-duration funds with these schemes collecting Rs 3,853 crore, banking and PSU debt Rs 6,416 crore and floater funds collecting Rs 5,199 crore.

Total assets under management of the mutual fund industry fell marginally to Rs 27.74 lakh crore from Rs 27.78 lakh crore.

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