Equity MFs see fourth straight month of outflows over profit booking

Debt funds witnessed net inflows of Rs 1.1 trillion, led by flows of over Rs 15,000 crore each in liquid, money market, short term bond and corporate bond funds.
Equity funds posted their fourth straight month of outflows as investors continued to book profits in October. Total outflows in equity oriented schemes stood at Rs 3,990 crore (including close-ended schemes) last month. The total outflows since July now exceed Rs 10,000 crore.

Multi-cap funds saw the highest outflows among equity funds to the tune of Rs 1,903 crore owing to profit taking and the regulatory overhang concerning the rejig in the funds' category definition. Large, mid and small caps funds saw combined outflows of about Rs 1,600 crore, while value/contra funds saw outflows of Rs 1,201 crore.

"There is a feeling that markets are ahead of fundamentals and there could be some volatility going ahead. So, the appetite for equities is low for now," said Akhil Chaturvedi-Associate Director and Head of Sales and Distribution, Motilal Oswal Asset Management.

The expected volatility ahead of the US elections could have also led investors to book profits.

Systematic Investment Plan (SIP) numbers remained robust, with a marginal increase in SIP contribution to Rs 7,800 crore in October over the previous month. SIP AUM rose 2.1 per cent to Rs 3.35 trillion in October over a month ago.

"Investors seemed to have moved a portion of their equity corpus from equities to debt, especially short term funds," said G Pradeepkumar, CEO, Union MF. He does not expect sizeable redemptions in the coming months but believes that inflows are likely only if there is a significant correction in the market.
Debt funds witnessed net inflows of Rs 1.1 trillion, led by flows of over Rs 15,000 crore each in liquid, money market, short term bond and corporate bond funds. The net collection in debt MFs between July and October (excluding Liquid, Overnight and Ultra short funds) has been more than Rs 1.67 trillion.

N S Venkatesh, CEO, AMFI said: “Rise in SIP Contribution and SIP AUMs during October and the continued slowing outflow in equity schemes reinforces the retail investors' confidence in mutual funds as an asset class. This trend is reflective in the economy improving further with green shoots in the form of attractive interest rates, rise in GST collections, digitalisation-driven efficiencies making Indian corporates healthier and a conducive government policy for attracting FDI and FPIs.”

The outflows significantly moderated for hybrid schemes at Rs 1,682 crore in October compared to Rs 4,219 in September and Rs 4,819 crore in August 2020. Outflows were led by balanced hybrid/aggressive hybrid funds to the tune of Rs 2,391 crore.

"What is surprising is that hybrid/asset allocation funds which are conservatively managed are also witnessing very high redemptions. This trend is not understandable as broadly these funds are apt to ride through volatile times and best suited for investment in these times of uncertainty," said Chaturvedi.

The total mutual fund assets under management as on October 31, 2020 rose to highest ever of Rs 28.2 trillion.

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