Equity Mutual Funds see outflow for 8th straight month in February

By: |
March 9, 2021 2:03 PM

With markets touching all-time highs in February, it provided a good profit booking opportunity for investors. Moreover, the elevated valuation levels could have also triggered rebalancing of portfolios.

Multi Cap Funds, Large & Mid Cap Fund and Focused Fund, however, were the three categories to witness net inflows in February.

Equity-oriented mutual funds continued to witness net outflows for the eight month in a row. On an overall basis, the net outflow was higher than the previous month. During the month of February 2021, the segment witnessed a net outflow of Rs 10,468.02 crore, which is higher than the net outflow of Rs 9,253.22 crore witnessed in the month of January.

With markets touching all-time highs in February, it provided a good profit booking opportunity for investors. Moreover, the elevated valuation levels could have also triggered rebalancing of portfolios.

“That said, the number of folios as well as gross purchase (new investments) were higher in February compared to January. This indicates that investors have now started to invest in the equity markets. But at the same time, existing investors are finding this as an opportune time to book profit as evident from the higher gross redemptions in February vis-à-vis January,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on equity-oriented funds based on AMFI’s monthly data for February 2021.

Flexi Cap Fund category was the worst hit during the month. During February 2021, 9 Multi Cap Funds were re-categorised as Flexi Cap Funds; whereas in January 16 Multi Cap Funds were re-categorised as Flexi Cap Funds. Therefore, continuing with the trend that we have been witnessing since June 2020, there have been increasing net outflows from the funds in this category (which were earlier a part of Multi Cap category). In February, the category witnessed a net outflow of Rs 10,439.9 crore, which was sharply higher than the net outflow of Rs 5933.67 crore in January.

Large Cap category was also hit hard in the month of February with a net outflow of Rs 1,280.15 crore, clearly on the back of profit booking by investors. However, the net outflow this month was lower than the net outflow of Rs 2,853.43 crore recorded in January. This was the third consecutive month of decline in the quantum of net outflows from the category, which indicates that more investors are now willing to hold their investments in these funds.

Multi Cap Funds, Large & Mid Cap Fund and Focused Fund, however, were the three categories to witness net inflows in February.

Like last month, this month too Multicap Fund received that highest net inflow of Rs 4077.94 crore, which was significantly higher than the net inflow of Rs 2,857.90 crore in January. “The investment mandate of Multi Cap Funds provides investors the benefit to capitalize on the investment opportunities arising in all the three segments of the equity markets viz. large, mid and small cap. With all the three-segments performing well, these funds have been attracting investor interest,” said Srivastava.

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