Overall, the mutual fund industry witnessed a net inflow of 89,813 crore across all segments last month, much higher than Rs 7,265 crore seen in June, data by Association of Mutual Funds in India showed on Monday.
Equity mutual funds witnessed an outflow of Rs 2,480 crore in July, making it the first withdrawal in more than four years, primarily on profit-booking by investors. Overall, the mutual fund industry witnessed a net inflow of Rs 89,813 crore across all segments last month, much higher than Rs 7,265 crore seen in June, data by Association of Mutual Funds in India (Amfi) showed on Monday. This inflow could be attributed to infusion in liquid funds and low duration funds.
As per the data, outflow from equity and equity-linked open ended schemes was at Rs 2,480.35 crore in July as compared to an inflow of Rs 240.55 crore in June. Such schemes had attracted Rs 5,256 crore in May, Rs 6,213 crore in April, Rs 11,723 crore in March, Rs 10,796 crore in February and Rs 7,877 crore in January.
July 2020 saw the first outflow since March 2016, when equity schemes witnessed a pull out of Rs 1,370 crore.
In July this year, except for equity linked saving schemes (ELSS) and focused fund categories, all the other equity categories witnessed net outflow.
Amfi Chief Executive N S Venkatesh attributed the outflow from equity-oriented funds to withdrawal from multi-cap and large cap funds due to profit-booking by investors.”Equity-oriented mutual funds witnessed their first major monthly net outflow in a long time. Multi-cap fund category was the worst hit followed by mid-cap and value fund categories, said Himanshu Srivastava, Associate Director- Manager Research at Morningstar India. This could be largely attributed to investors booking profit given the surge in the equity markets, across market segments, in the recent times, he added.
Groww Co-founder and COO Harsh Jain said, booking profits and exiting after a sharp fall in equity markets is a common behaviour among retail investors. Though, the number of more mature investors who stick through ups and downs using SIPs is also steadily rising”.
Multi-cap, midcap, value fund and multi-cap saw outflows to the tune of Rs 1,033 crore, Rs 579 crore, Rs 549 crore and Rs 365 crore, respectively, during the month under review. However, focussed funds attracted Rs 535 crore, while the same for ELSS was Rs 279 crore.
Apart from equity funds, overall hybrid funds saw an outflow of Rs 7,301 crore. With equity markets doing well and stable scenario in the fixed income markets, hybrid schemes too witnessed significant net outflows, with viewing this scenario as a good exit opportunity, Srivastava said.
Within the hybrid schemes, balanced hybrid or aggressive hybrid fund, whose mandate is to invest between 65-80 per cent of assets in equities, witnessed a net outflow of Rs 2,196 crore in July. “This category has been witnessing consistent net outflow for a long time, given the challenging scenario in both equity and debt markets earlier,” he added.
Fixed income securities or debt funds saw an inflow of Rs 91,392 crore last month compared to Rs 2,862 crore in June.
Venkatesh said debt mutual fund schemes are an attractive proposition, with benign interest rate environment leading to better yields, as also superior risk management by the debt fund managers. Among fixed-income securities, low duration funds saw an infusion of Rs 14,219 crore, liquid schemes (Rs 14,055 crore) corporate bond funds (Rs 11,910 crore) and banking and PSU funds (Rs 6,323 crore).
However, credit risk funds saw an outflow of Rs 670 crore in the period under review, which was much lower than a withdrawal of Rs 1,494 crore in June, Rs 5,173 crore in May and Rs 19,239 crore in April. Besides, investors are preferring safe haven assets, gold exchange traded funds (ETFs), as such instruments saw an inflow of Rs 921 crore last month as compared to Rs 494 crore witnessed in June.
“Higher investment in gold ETFs is understandable as more investors are parking their cash in gold as a hedge against the market which is reeling from the effects of the economic shock from the pandemic,” Jain said. The assets under management of the 45-player mutual fund industry rose to Rs 27.12 lakh crore in July-end from Rs 25.5 lakh crore in June-end.
Going ahead, Venkatesh said, “the outlook of the mutual fund flows for the rest of 2020-21 would continue to be encouraging, with rising digital-driven inflows, accommodative stance on interest rates by the RBI, improving macro-economic environment and pick-up in economic activity on the back of easing of lockdown.”