Equity mutual fund net outflows approach 2013 levels

Share on whatsapp
Share via Whatsapp
Share on twitter
Tweet it out
Share on facebook
Share on FB
Share on linkedin
Post on LinkedIn

For the second month in a row, equity mutual funds as a category saw net outflows in August 2020. AMFI has just published its monthly data on mutual fund outflows and inflows, which shows that the mutual fund industry is currently facing redemption pressures on several fronts.

At Rs 4,000 crore, the equity mutual fund outflows is not only higher than the previous month but also more than the October 2013 outflow of Rs 3,225 crore.

August 2020 also marked the third month of overall net outflows in mutual funds for the calendar 2020. February and March were the other months where the industry witnessed net selling this year.

Equity funds redeemed across the board

Investors redeemed their holdings across nearly all equity segments  – large-cap, mid-cap, and multicap – save for limited inflow into sector funds and some tepid investment in ELSS. Within the equity fund categories that saw fell to investors moving out, multicap funds saw the maximum redemption. This was followed by the midcap fund category and value/ contra funds. Sector funds bucked the trend, with net inflows of Rs 370 crore, as investors looked for direct bets through sector funds.

The redemption could be explained by two possible triggers: one, the markets getting increasingly disconnected from the economic situation and corporate fundamentals, which could have pushed investors into profit booking. Two, a real need to take some money out given a likely situation of pay cuts/job losses for individuals. 

In the hybrid space, both arbitrage funds and hybrid aggressive funds saw severe redemption pressure as well. While the former category has seen returns shrink given poor spreads in arbitrage, the latter may have been punished for poor performance as many hybrid funds failed to contain declines in the March correction and fell more than even large-cap funds.

Interestingly, the strong inflows seen in ETFs in earlier months has also dwindled – but even so, this category managed to end the month with net inflows, unlike active equity funds.

Gold ETFs on the other hand, managed to keep their net flows ticking thanks to a phenomenal returns surge. The recent decline in gold returns do not appear to have dented investors’ attraction to the metal by much.

Mutual fund outflows in debt, too

In the debt space, the heavy inflows since March 2020 into the gilt category reversed in August. Gilt mutual fund outflows stood at a net outflow of Rs 1,122 crore (and it was Rs 25 crore for constant maturity funds). The 10-year gilt yield moved up sharply from 5.8% to  6.2% in less than a month while 3 and 5-year gilts rose even higher (read more about this here).

This caused the returns of gilt funds to drop sharply and could likely have contributed to the selling witnessed in the gilt categories. Increasing concerns over inflation, supply side constraints and government borrowing may also be sending signals to the market that there may not be much of a rally left in this space, triggering profit booking.

The overnight and liquid space too saw outflows – likely from companies dipping into their treasury money to meet stretched working capital requirements, as a result of the lockdown. Other debt categories, however, managed to garner inflows in August, albeit at a much lower rate than in the July month.

It is not just redemption pressure and mutual fund outflows that is a challenge to the industry. Investments too have dwindled as suggested by SIP inflows. SIP inflows as of July 2020, at Rs 7,831 crore has fallen to levels seen 2 years ago. This is now providing fresh challenges for AMCs to grow their assets.

Share on whatsapp
Share via Whatsapp
Share on twitter
Tweet it out
Share on facebook
Share on FB
Share on linkedin
Post on LinkedIn

Please note that any specific queries on any of our recommendations will be answered ONLY through email. If you are a subscriber, please mail contact@primeinvestor.in.  Only general queries or discussions will be answered through the comment section of the blog. For full details, please refer to this post – How to communicate with PrimeInvestor.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Register for FREE!

Gain instant access to more PrimeInvestor articles, researched products, and portfolios

The essence of PrimeInvestor

Register for FREE!

Gain instant access to more PrimeInvestor articles, researched products, and portfolios

Legal Disclaimer : Redwood Research (with brand name PrimeInvestor) is an independent research entity offering research services on personal finance products to customers. We are a SEBI registered Research Analyst (Registration: INH200007478). The content and reports generated by the entity does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. All content and information is provided on an ‘As Is’ basis by PrimeInvestor. Information herein is believed to be reliable but PrimeInvestor does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. The services rendered by PrimeInvestor are on a best effort basis. PrimeInvestor does not assure or guarantee the user any minimum or fixed returns. PrimeInvestor or any of its officers, directors, partners, employees, agents, subsidiaries, affiliates or business associates will not liable for any losses, cost of damage incurred consequent upon relying on investment information, research opinions or advice or any other material/information whatsoever on the web site, reports, mails or notifications issued by PrimeInvestor or any other agency appointed/authorised by PrimeInvestor. Use of the above-said information is at the user’s own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. All intellectual property rights emerging from this website, blog, and investment solutions are and shall remain with PrimeInvestor. All material made available is meant for the user’s personal use and such user shall not resell, copy, or redistribute the newsletter or any part of it, or use it for any commercial purpose. PrimeInvestor, or any of its officers, directors, employees, or subsidiaries have not received any compensation/ benefits whether monetary or in kind, from the AMC, company, government, bank or any other product manufacturer or third party, whose products are the subject of its research or investment information. The performance data quoted represents past performance and does not guarantee future results. Investing in financial products involves risk. Mutual Fund Investments are subject to market risk, read all scheme related documents carefully. As a condition to accessing PrimeInvestor’s content and website, you agree to our Terms and Conditions of Use, available here. This service is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Redwood Research or its affiliates to any registration or licensing requirement.

• Aditya Birla Mutual Fund • Axis Mutual Fund • Baroda Mutual Fund • BNP Paribas Mutual Fund • BOI AXA Mutual Funds • Canara Robeco Mutual Fund • DSP Mutual Fund • Edelweiss Mutual Fund • Essel Mutual Fund • Franklin Templeton Mutual Fund • HDFC Mutual Fund • HSBC Mutual Fund • ICICI Mutual Fund • IDBI Mutual Fund • IDFC Mutual Fund • IIFL Mutual Fund • Indiabulls Mutual Fund • Invesco Mutual Fund • ITI Mutual Fund • Kotak Mahindra Mutual Fund • L&T Mutual Fund • LIC Mutual Fund • Mahindra Mutual Fund • Mirae Asset Mutual Fund • Motilal Oswal Mutual Fund • Nippon India Mutual Fund • PGIM Mutual Fund • PPFAS Mutual Fund • Principal Mutual Fund • Quant Mutual Fund • Quantum Mutual Fund • Sahara Mutual Fund • SBI Mutual Fund • Shriram Mutual Fund • Sundaram Mutual Fund • Tata Mutual Funds • Taurus Mutual Funds • Union Mutual Funds • UTI Mutual Funds • Yes Mutual Funds

Equity: Large Cap Funds | Mip Cap Funds | Large And Mid Cap Funds | Small Cap Mutual Funds | Contra Mutual Funds | Dividend Yield | Focused Mutual Funds | Find Top Index Funds | Best Sector Funds | Thematic Mutual Fund | Best Value Mutual Funds | Equity Linked Savings Scheme | Tax Saving Funds
Debt: Banking And PSU Funds | Corporate Bond Funds | Credit Risk Funds Mutual Funds | Dynamic Bond Funds | Floating Rate Funds | Gilt Mutual Funds India | Find Top Liquid Funds In India | Long term debt funds | Low Duration Funds Debt Funds | Medium Duration Debt Funds | Medium To Long Duration Funds | Money Market Debt Funds | Overnight Debt Funds | Short Duration Debt Funds | Ultra Short Term Debt Fund
Hybrid: Aggressive Hybrid Funds | Arbitrage Mutual Funds | Balanced Advantage Mutual Funds | Conservative Hybrid Funds | Dynamic Asset Allocation | Equity Saving Funds | Multi Asset Funds | Multi Asset Allocation

Scroll to Top
Login to your account