Equity-oriented mutual funds witnessed their first major monthly net outflow in a long time. In July, except for ETFs and Focused Fund categories, all the other equity categories witnessed net outflow for the month.
Multi-Cap Fund category was the worst hit followed by mid-cap and value fund categories. According to the data released by Association of Mutual Funds in India, multicap schemes saw the highest outflows of Rs 1,033.17 crore followed by mid cap funds with outflows of Rs 579 crore.
The outflows are largely attributed to investors booking profit given the surge in the equity markets, across market segments, last month. Overall, outflows in equity-oriented schemes stood at Rs 2,480.35 crore
“The outflows in equity funds is on the back of profit booking and investors are waiting on the sidelines to re-enter equity funds,” said N. S.Venkatesh, Chief Executive, AMFI.
In July, BSE’s Sensex gained 7.7 percent, while NSE’s Nifty Index rose 7.5 percent.
The only two category which saw inflows were Exchange-traded funds and Focused funds.
Focused funds saw inflows to the tune of Rs 534 crore last month compared to Rs 317 crore in June. Inflows in ETFs saw a rise in July at Rs 13,125.6 crore against Rs 4,093 crore in the previous month.
With equity markets doing well and stable scenario in the fixed income markets, hybrid schemes too witnessed significant net outflows, viewing the scenario as a good opportunity to exit.
Balanced Hybrid Fund/Aggressive Hybrid Fund, whose mandate is to invest between 65-80 percent of assets in equities, witnessed a net outflow of Rs 2,196.3 crores in July.
Otherwise too, this category has been witnessing consistent net outflow for a long time, given the challenging scenario in both equity and debt markets earlier.
In July, hybrid fund outflows were at Rs 7,302 crore compared with Rs 355.8 crore seen in June.
The outflows in most debt categories reversed in the month of July. Liquid fund inflows which are used by corporates to park surplus cash witnessed Rs 14,055 crore worth of inflows in July as against Rs 44,226.2 crore of outflows.
During the review period, medium duration funds witnessed inflows of Rs 379 crore compared with outflows of Rs 226 crore in June. Low Duration Debt schemes saw the highest inflows of Rs 14,219 last month.
Venkatesh of AMFI attributed the rise in debt fund inflows to benign interest rate scenario. “Debt Mutual Fund schemes are an attractive proposition, with benign interest rate environment leading to better yields,” Venkatesh said.
When interest rates fall, prices of bonds – and therefore the net asset values of debt funds invested in them – rise. So far, the RBI has reduced policy rates by 250 basis points since February 2019.
Credit Risk funds was the only category that saw outflows in July. However, the inflows fell more than half. Credit Risk Funds witnessed outflows of Rs 669.7 crore as against outflows of Rs 1,493.7 crore in June.
Overall, the total assets under management (AUM) of the 42-player mutual fund industry was Rs 27.1 lakh crore in July, higher than Rs 25.5 lakh crore in June.
On the outlook for the industry Venkatesh feels, flows for the rest of 2020-21 would continue to be encouraging, with rising digital-driven inflows, accommodative stance on interest rates by the RBI, improving macro-economic environment and pick-up in economic activity on the back of easing of lockdown.