Ajit Menon, CEO at PGIM India Asset Management, said outflows from equity funds in August was more to do with the investors’ concerns that markets might witness correction.
For the second consecutive month in August, equity schemes of mutual funds reported net outflows as investors pulled money out over concerns arising out of weak economic conditions and in anticipation of fall in the equity markets. Data from the Association of Mutual Funds in India (Amfi) show that equity funds saw net outflows of Rs 3,999.62 crore in August, the highest since September 2010, when net outflows had stood at Rs 7,281 crore.
Ajit Menon, CEO at PGIM India Asset Management, said outflows from equity funds in August was more to do with the investors’ concerns that markets might witness correction. “After the sharp fall in March, people have not been able to react as markets recovered smartly. But, now I think investors would be taking money off the table and enter the markets at a later stage,” said Menon.
The Sensex gave returns of 2.72%, while the Nifty was up by 2.84% during the month under review.
Equity flows have been slowing down since the start of this financial year. In April and May, net inflows into equity funds stood at Rs 6,212.96 crore and 5,256.52 crore, respectively. In June, inflows further went down to Rs 240.55 crore. In July, there was a net outflow of Rs 2,480.35 crore. Market participants said many investors prefer to hold cash, rather than deploying in the equity markets in uncertain times.
Even inflows into the systematic investments plans (SIPs) slowed down in the last few months. Inflows through SIP stood at Rs 7,791.63 crore in August, compared to Rs 7,831 crore in July. Since June this year, flows into SIPs have been below Rs 8,000 crore. For all the months of the previous fiscal, inflows through SIPs were above Rs 8,100 crore.
Sunil Subramaniam, MD at Sundaram Mutual, said, “I think for SIPs numbers are good as investors continue to invest and there are no closures in a big way. However, there might be some investors who might have taken the money from SIPs maturity and not invested it back again. I think as there will be economic recovery, investors will start investing in SIPs.”
According to the senior officials in the industry, in August, around 11 lakh new SIPs were registered while 7.58 lakh SIPs were discontinued, or their tenure got completed. However, the rise in the markets in the last few months have led to a rise in assets under management of equity schemes. In March, net assets under management of equity funds stood at Rs 5.78 lakh crore, which has moved up to Rs 7.69 lakh crore in August, a rise of 33%.
In August, large-cap category saw net outflows of Rs 1,553.50 crore in open-ended equity-oriented schemes. Multi-cap and mid-cap funds witnessed outflows of Rs 1,157.21 crore and Rs 602.98 crore, respectively. Focused funds, thematic funds and equity-linked saving schemes (ELSS) saw inflows in August.