The contraction in fund flows are a cautionary tale for India’s $1.9 trillion stock market
that’s looked past some dire economic projections and climbing virus numbers to jump more than 40 per cent from its March low. Local money managers softened the blow by buying at the depths of the swoon even as foreigners pulled a record $8.4 billion. If the likely outflows in July marks the start of a trend, funds won’t have the same firepower the next time risk appetites dries up.
“Since the markets
have continued to rise this month, I think redemptions will go up,” said Sunil Subramaniam, MD of Sundaram Asset Man-agement. “Some investors are redeeming out of relief as this rally takes more and more of the deep underwater assets back to par value.”
With gains of about 9 per cent so far in July, the Sensex is set for a second monthly advance, thanks to flows from overseas funds and participation by a growing contingent of amateur investors. But mutual fund investors aren’t sharing this exuberance.
June redemptions in equity plans almost doubled to 135.2 billion rupees from May, data from AMFI show. With withdrawals extending into July, fund managers have sold a net Rs 58 billion of shares so far this month, the data compiled by Bloomberg shows. “Investors need money during these uncertain times and they would rather book profits when the going is good,” said Vidya Bala, head of research and co-founder at Primeinvestor.in.