Equity MFs witness further bleeding of Rs2,869 crore in October
November 10, 2010
The relentless outflow of funds from equity mutual fund schemes continued in October; fund companies hope that investors looking to book profits would be flushed out by now
It seems that the steady bleeding experienced by equity mutual funds is showing no signs of abating. The month of October has witnessed further outflow of Rs2,869 crore from the corpus of equity funds, according to data released by industry body Association of Mutual Funds in India (AMFI). This takes the total redemption over the past ten months to a whopping Rs17,000 crore.
The sales of new equity schemes stood at a paltry Rs106 crore (Baroda Pioneer PSU Equity Fund and Reliance Arbitrage Advantage Fund were launched) while sales of existing equity schemes was Rs4,914 crore in October. But last month, redemptions from existing equity schemes stood at Rs8,413 crore meaning that equity mutual funds suffered Rs2,900 crore of net outflow in October 2010. In September investors pulled out more than Rs7,000 crore from equity schemes.
Liquid funds have seen a healthy net inflow of Rs2,283 crore due to the improved liquidity situation while gilt funds recorded Rs117 crore net inflows in October. As on October 2010, the assets under management (AUM) of the industry stood at Rs6.46 lakh crore.
Most fund companies and distributors consider that equity outflows are a natural consequence of the phenomenal rally in stock markets after a major crash in 2008. They argue that investors who had invested at high valuations during 2008 were looking for the exit route now that the market has regained previous levels.
However, these companies are now hoping that investors would now stop making a beeline for the exit door as most of them would have been flushed out by now. However, only time will tell whether this, in fact, turns out to be true.
Ever since the Securities and Exchange Board of India (SEBI) banned the entry load for mutual fund schemes in August 2009, fund companies have been suffering a steady haemorrhage of cash from their equity schemes. Over the last 12 months, funds have recorded positive inflows only in two months, despite the fact that the Sensex was up 22% over this period and has almost touched an all-time high.— Moneylife Digital Team