Redemption pressure gripped mutual funds which led to fall in total category wise asset under management (AUM) by 1.2 percent on a sequential basis to Rs 19.03 lakh crore in May 2017, IDBI Capital said in a report.
Retail investors pulled out over Rs 41,000 crore from mutual funds in May as they preferred to take some profits after a big 17 percent rally seen so far in 2017, said a report.
Liquid funds witnessed most of the outflows, while equity funds saw an increase of 2.7 percent. The outflows comes following an inflow of about Rs 1.51 lakh crore in the preceding month.
Mutual funds saw a fall in total category wise asset under management (AUM) by 1.2 percent on a sequential basis to Rs 19.03 lakh crore in May 2017, IDBI Capital said in a report.
Top stocks which fund managers sold in May include names like IOC, Lupin, REC, Bharat Electronics, Glenmark Pharma, PNB, RBL Bank, etc. among others.
(Note: For example, in IOC, funds still hold Rs5,952 crores worth of shares, as of 31st May, 2017)
"There is a general feeling that small and midcaps are excessively valued. Consequently, funds are switching from small and midcaps to largecaps," Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services told Moneycontrol.
According to a CNBC-TV18 report, Attorney General Mukul Rohtagi returned the HDFC-Max Life merger proposal back to the Insurance Regulatory and Development Authority of India without giving any opinion. The insurance regulator had sought AG's opinion for the legal validity of the proposal.
Mutual fund managers dumped most of the stocks from pharma space such as Lupin. The sector is trading at a 3-year low and has lost over 10 percent in value over the last one year. Compared to this the BSE Sensex has risen over 17 percent.
Pharmaceutical companies are having a tough time with the US authorities pulling them up regularly for irregularities at one end, while on the other hand the companies are taking a hit on the revenue front at the international and domestic front, said a Moneycontrol report.
"There is another one sector where we are seeing some pain and that is pharmaceuticals. I do not see telecom being at a stage in which there is a change in the business model, but sectors like IT and pharmaceuticals are obviously at a stage in which you are looking for a bit of a change in the business model," Prashasta Seth, chief investment officer at IIFL Asset Management told Moneycontrol.
AUM of Equity Fund increased by 2.7 percent or by Rs13,394 crores to Rs5.18 lakh crores in May 2017 over April 2017.
The assets of ELSS increased by 2.2 percent to Rs65,192 crore, meanwhile Equity Fund registered net inflow of Rs 10,208 crore and ELSS Fund saw a net inflow of Rs 531 crores. Thus, total equity funds witnessed net inflow of Rs10,739 crores.
Investors should also look at their mutual fund portfolio on a regular basis to avoid getting stuck in a bad situation when bears take control of D-Street. Although no major correction is expected, but further consolidation cannot be ruled out.
“During a bull run, greed takes over rationality and investors rush to funds or asset classes which have done well in the past, entirely ignoring the fact that past performance may not continue going ahead and more importantly the suitability of the fund/asset class in their individual portfolios,” Ravi Samalad of Morningstar India told Moneycontrol.“While self-directed investors may not need guidance, first-time MF investors would do well to consult a financial adviser to avoid getting caught in funds which may not suit their risk profile,” he said.