MUMBAI: Mutual fund managers continue to struggle with withdrawals, as data showed that equity schemes witnessed net outflows for eight months in a row, with redemption pressure rising, while stock markets hit multiple record highs in February.
According to data released by the Association of Mutual Funds in India (Amfi) on Tuesday, net outflows from equity mutual fund schemes rose to Rs12,822.37 crore in February. This compares to Rs12,078.54 crore worth outflows in January and below December’s record Rs13,121 crore outgo.
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Analysts said gains in markets prompted investors to book some profits which was evident from the rise in redemptions for the month. In February, the benchmark Sensex hit the 52000-mark for first time and Nifty touched a record 15,000 on budget proposals. However, towards the end, rising US bond yields took some shine off equities, with markets gaining around 6% in February.
“With markets touching all-time highs in February, it provided a good profit booking opportunity for investors. Moreover, the elevated valuation levels could have also triggered rebalancing of portfolios. Existing investors are finding this as an opportune time to book profit as evident from the higher gross redemptions in February vis-à-vis January.” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India said.
Net redemptions from equity schemes were higher at Rs44,817.11 crore in February, up from Rs33,383.65 crore in the previous month. Contribution from systematic investment plans (SIP) fell marginally to Rs7,528.14 crore from Rs8,023.39 crore in January.
According to NS Venkatesh, chief executive officer, Amfi, holidays in the last two days of February led to a marginal decline in SIP collection in February.
Akhil Chaturvedi, head of sales & distribution, Motilal Oswal Asset Management Company, is optimistic that some meaningful consolidation of markets could lead investors to come back and make fresh allocations at some stage. “There is general worry on valuations and the current rally possibly unreal and therefore investors seem to be trying to time in some way. First few days in March look slightly better with the redemption velocity coming down, but need to wait for how it plays through the month,” he said.
Amfi data showed that during February, nine multi-cap funds were re-categorised as flexi-cap funds, compared to 16 in January.
In February, multi-cap funds, large & mid-cap funds, and focused funds saw net inflows. There was an outflow of Rs1,280.15 crore from large-cap funds. “However, the net outflow this month was lower than the net outflow of Rs2,853.43 crores recorded in January. This was the third consecutive month of decline in the quantum of net outflows from the category, which indicates that more investors are now willing to hold their investments in these funds,” said Srivastava.