November figures: Equity Mutual Funds see record outflow of Rs 12,917 crore

The surge in equity markets has led to investors pulling out money from the open-ended equity schemes in November. Data from Association of Mutual Funds in India (Amfi) showed that equity funds saw record net outflows of Rs 12,917.36 crore in November. Equity funds have continued to see net outflows since July as investors continued to book profits with equity markets touching new highs.

Overall, the industry saw net inflows of Rs 27,194.15 crore in November, while the net asset under management (AUM) stood at Rs 30 lakh crore at the end of the month. However, open-ended, debt-oriented schemes saw net inflows of Rs 44,983.84 crore in the month under consideration. While liquid and overnight funds saw net outflows, categories such as low-duration, short-duration, corporate bond and banking and PSU funds saw net inflows.

Market participants are of the opinion that investors who had seen their gains wiped off in March were removing the money from equity schemes. Sunil Subramaniam, MD at Sundaram Mutual said, “At the ground-level, we have seen ‘V’ shape recovery have started in the economy. But even now the gross domestic product (GDP) is in negative. So, on the economic front, a lot of people feel that things are not yet fine. But at the same time markets have been behaving unusual and with markets at high — many investors have booked profits in the markets.” In November Sensex and Nifty were up by 11.45% and 11.39%, respectively.

In the last five months, open-ended equity schemes have seen net outflows of Rs 22,856.68. In August, equity schemes had seen net outflows of Rs 3,999.62 — the highest recorded by them since September 2010.

Even the inflows into the systematic investment plans (SIPs) saw a dip in November. The inflows through SIP stood at Rs 7,302.16 crore in November compared to Rs 7,799.98 crore in October. “There is a drop of roughly Rs 500 crore in SIPs and I think there is nothing to worry because last three days of November were holidays. We have seen that large number of people have SIPs registered on those days, so the money will get accounted in December,” said N S Venkatesh, chief executive of Amfi.

However, market players believe that many investors are not renewing their SIPs, which they might have started three years ago due to the lower returns. “Three-year SIPs would have been maturing now and today it wouldn’t have given investors much returns in mid- and small-cap schemes, so they are taking their money away,” added Subramaniam. Data from Value Research revealed that in the last three years, on an average, mid-cap and small-cap funds had given returns of 4.42% and 0.84%, respectively.

In November, all categories in the open-ended equity schemes saw net outflows. Large-cap funds saw outflows of Rs 3,289.18 crore, followed by multi-cap funds, which also saw net outflows of Rs 2,842.08 crore in November. Officials in mutual fund industry also believed that some money from equity would have even moved to real estate or direct equity in the last few months.

“All of these outflows would not have gone completely out of equities as an asset class, but probably moved to direct equities as investors have had some successes in past few months investing directly. Some part of this liquidity could have also flown to real estate with renewed interest amongst genuine buyers wanting to own home at lower interest rates and falling taxes and prices. There are also investors who would be sitting on cash to deploy once again post any meaningful correction in near future,” said Akhil Chaturvedi, associate director & head of sales at Motilal Oswal Asset Management Company.