Gold ETFs witness net outflows of Rs 141 cr in November

By: |
December 9, 2020 12:50 PM

After seven consecutive months of net inflows, the Gold ETF category witnessed net outflows in November to the tune of Rs 141.1 crore, largely on the back of profit booking by investors.

BSE Sensex, gold, share marketBack in the year 1999, gold prices averaged at Rs 4,234 per 10 grams, while the S&P BSE Sensex was at 4,141 points

After seven consecutive months of net inflows, the Gold ETF category witnessed net outflows in November to the tune of Rs 141.1 crore, largely on the back of profit booking by investors, as per AMFI’s monthly data for November 2020.

Gold prices came-off their all-time high in recent times, after witnessing almost an uninterrupted rally this year. Also, “with positive development around the Covid vaccine, economies moving towards normalcy and equity markets doing well, there is uncertainty over the direction of gold prices going ahead. Given this scenario, and with the prices still at elevated levels, investors would have found this as an opportune time to book profit,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.

Gold, in fact, functions as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversifier, and alleviates losses during tough market conditions and economic downturns. This is where it draws its safe-haven appeal, which has been on full display since 2019.

However, most of the debt-oriented categories witnessed net inflows in the month of November, though the pace of net inflow was lower than the previous month. Through November, debt categories recorded a net inflow of Rs 44,938.8 crore, which was significantly lower than the net inflow of Rs 110,466.5 crore in October. The debt categories which pulled the overall net inflow figure down were Overnight Fund and Liquid Fund, as both witnessed net outflows during the month.

“Investors continue to focus on fixed income categories having relatively shorter duration profile. Hence categories such as Ultrashort, Low Duration, Money Market and Short Duration Funds received good net flows during the month. In fact, Low Duration category received the highest net inflow in November. In addition to that, funds with pristine credit quality, especially from categories such as Banking and PSU Fund and Corporate Bond, continue to gain traction from investors highlighting their preference for safety in these segments. Money Market funds have also been the beneficiary of this trend,” said Srivastava.

The net outflows from the Credit Risk category has moderated quite substantially over the last few months. During November, the category witnessed a net outflow of Rs 15.4 crore, which was sharply lower than the net outflow of Rs 414.8 crore in October. Compared to October, the number of folios has increased, the fund mobilised has gone up whereas the redemptions have come down. Although there continues to be cautiousness, the data also indicates that investors have started to gradually open up towards this category. The credit risk category has been losing assets consistently, the pace of which shot up substantially during the peak of the liquidity crises in the month of April this year.

The flows into the Medium Duration category continue to increase month after month. In November, the category received a net inflow of Rs 1,761.1 crore, higher than the net inflow of Rs 1,566.1 crore in October. Since July, the category has recorded a net inflow of Rs 6,012.7 crore.

This category houses some credit-oriented strategies and suffered significantly during the March, April and May period of liquidity crises. From March 2020 till June 2020, the category witnessed a net outflow of Rs 10,274 crore. However, “since then, the credit profile of these funds has improved with higher investments in AAA or equivalent rated securities. Also, on the duration front, the category is positioned well in the current environment. This continues to attract investors towards the category,” said Srivastava.

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