Equity mutual funds witnessed an outflow for the fifth straight month as redemptions intensified on profit-booking despite benchmarks scaling lifetime highs.
Net outflow from equity and equity-linked mutual fund schemes stood at Rs 12,917.36 crore in November compared with an outflow of Rs 2,724.95 crore in October, according to data released by the Association of Mutual Funds in India. That’s the biggest outflow at least since April 2018, when the AMFI began compiling data in the current manner.
“This is mainly on account of profit-booking. People believe that there is a huge amount of movement in the equity markets and they are trying to take advantage and taking money off the table. The stock market has moved quite quickly upwards, so people are taking profits,” said NS Venkatesh, chief executive officer at AMFI.
First, fears of the impact of the Covid-19 pandemic on businesses and then investors booking profits dragged net investments into equity funds for the past few months. That too when equity markets soared. In November, the Nifty 50 gained 11.3%. The gauge even crossed the 13,000-mark for the first time, erasing all the pandemic-triggered losses, on hopes of a potential Covid-19 vaccine and quicker-than-expected economic recovery. Foreign investors have fuelled the surge, piling a record $9.6 billion into Indian shares in November. The Sensex, too, gained more than 11% last month.
“It’s understandable that people are pulling money out of equity-oriented schemes at this time. From a valuation standpoint, the equity markets look very highly rated. We’re currently at around 32 [times] PE for the Sensex,” said Harshvardhan Roongta, certified financial planner and founder of Roongta Securities. “We have people who called us asking whether to book profits. But our view is that if you don’t need money for the next three-four years, you should stay invested,” Roongta said.
