Equity MFs see outflow for seventh straight month in January on profit booking

Market experts believe that since the recategorisation of funds to flexi-cap funds is new, trends with respect to such funds could only be observed after a few months.

Equity-oriented schemes of mutual funds continued to see outflows for the seventh straight month in January as high net-worth investors booked profits. Net outflows from open-ended equity schemes in January was to the tune of Rs 9,253.22 crore, according to the latest data from the Association of Mutual Funds in India (Amfi). However, inflows from systematic investment plans (SIPs) remained strong at Rs 8,023.39 crore in the same period.

As stock markets continued to hit new highs, assets under management (AUMs) of the mutual fund industry also touched all-time highs in January. The AUM for the MF industry hit an all-time high of Rs 31.84 lakh crore.

After combining the flows of both open-ended and close-ended equity schemes, the net outflows from the equity schemes stood at Rs 12,194.18 crore. Debt schemes saw an outflow of Rs 33,408.76 crore during the month. The total outflow for close-ended equity schemes from the period between July 2020 and January 2021 stood at Rs 42,257.02 crore. Market experts believe that the schemes have continued to witness profit-booking by investors and this trend is likely to remain going forward. G Pradeepkumar, chief executive officer, Union AMC, said, “It is hard to tell when the equity flows will see a turnaround.

There are many people waiting on the sidelines to enter the markets at better levels. Perhaps, if there is a meaningful correction in the markets, we could see flows coming into the markets.” The number of folios in January for equity schemes stood at 6,44,24,084, which is higher than December’s 6,37,54,809. According to Pradeepkumar, this indicated that new investors, mostly belonging to the retail category, were entering the market whereas, high net-worth investors were booking profits and putting their funds in other assets.

The folios belonging to the SIPs also increased in January. The number was at 3,47,12,422 in December 2020 and it increased to 3,55,90,736 in January. Inflows from SIPs were at Rs 8,023.39 crore in January, compared to Rs 8,418.1 crore in December. AMFI explained that the number in December was higher since flows from a few days in November got pushed into the last month of 2020, had that not been the case the inflows in January 2021 would be higher than December 2020. N S Venkatesh, chief executive, Amfi, said, “Inflows continued via the SIP route, as seen from the rising number of new SIP registrations coupled with robust monthly SIP contribution.”

Amfi in January introduced the flexi-cap fund category, which saw an outflow of Rs 5933.67 crore. This is the first time that flexi-cap schemes have been announced separately. In January, 16 multi-cap funds were re-categorised as flexi-cap fund and so, the funds mobilised, redemption figures of these funds were shown under flexi-cap fund.

Market experts believe that since the recategorisation of funds to flexi-cap funds is new, trends with respect to such funds could only be observed after a few months.

What’s more is that the extent of outflows in January has reduced from that in November 2020. The outflows in January stood out Rs 9,253.22 crore whereas that in November stood at Rs 12,917.36 crore. Furthermore, the only equity schemes to witness inflows in January were sectoral and thematic funds as well as dividend yield funds. The sectoral funds saw inflows worth Rs 5,933.67 crore.

Gautam Kalia, head – investment solutions, Sharekhan by BNP Paribas, said, “Given the stretched valuations, even within the equity category, investors preference seemed to be for thematic ideas over broader markets. The pace of outflows from equities has, however, slowed for the third month and will likely turn positive soon as clients get used to the new normal.”