Equity mutual funds witnessed outflows for the seventh straight month in January as investors remained cautious ahead of the Union Budget presentation.
Investors pulled out a net Rs 9,253.22 crore from equity and equity-linked mutual fund schemes in January compared with an outflow of Rs 10,147.12 crore in the preceding month, according to data released by the Association of Mutual Funds in India. The outflow in November was the highest since at least April 2018, when AMFI started compiling data in the current format.
The first 10 months of the financial year saw a net outflow of Rs 30,546.58 crore compared with a net inflow of Rs 83,787.69 crore in the entire year to March 2020.
Equity mutual fund schemes have seen consistent outflows even as markets rebounded from last year’s pandemic-driven selloff and then rose to new records. The redemption pressure can be partly attributed to investors exiting after recovering losses or needing cash after widespread job losses and salary cuts.
Markets, too, saw the worst start to the year since 2016 falling in the run-up to the budget in January. They recovered after the Finance Minister presented the budget on Feb. 1 to scale new peaks.
Index will keep hitting new highs but existing investors are riding the wave, booking profits at different stages, according to NS Venkatesh, chief executive officer at AMFI. But at every level, there are new entrants who will look to ride the new levels, he said on a conference call.
Multi-cap schemes saw net investments after eight months, while selling continued in large, mid and small caps.
Investors pulled out of large caps for the eighth straight month. Small caps witnessed outflows for the fourth month in a row, and the most since AMFI started releasing granular data in April 2019.
Selling in mid caps is continuing since July 2020.
Individual contributions through systematic investment plans dropped again in January but managed to stay above Rs 8,000 crore.
The December SIP contribution included around Rs 500 crore received in November. “If we adjust for the November numbers, SIP contribution in January is higher than what was seen in December,” Venkatesh said.
Overall, the mutual fund industry across categories saw a net outflow of Rs 35,586.60 crore compared with a net investment of Rs 2,968 crore in December.
That’s on account of a Rs 45,316-crore outflow from liquid funds, used by companies to park short-term cash, compared with a Rs 5,102-crore inflow in December.
Outflow in liquid funds, according to Venkatesh, might be because people would have taken out money for liquidity management.
Credit risk funds saw net investments after at least two years. Such funds saw an inflow of Rs 366 crore compared with Rs 190-crore outflow in December.