Gold ETFs continue to see outflow in May on profit-booking

Investors remained bearish on gold exchange-traded funds (ETFs) in May and pulled out Rs 79 crore from this instrument, taking the total to Rs 148 crore in the first two months of the current financial year, mainly on account of profit booking.

The trading in Gold ETF segment has been tepid in last three financial years. The funds witnessed an outflow of Rs 903 crore, Rs 1,475 crore and Rs 2,293 crore in 2015-16, 2014-15 and 2013-14, respectively.

The pace of outflow, however, slowed down in 2015-16 fiscal as against the preceding two years on account of sluggish equity market.

"Indian Gold ETFs continue to witness outflows with more investors seen exiting the yellow metal. This could largely be on account of investors booking profits who would have bought at lower levels around and seeing good returns in a small pan of time," Quantum AMC Senior Fund Manager (Alternative Investments) Chirag Mehta said.

Also, investments in stocks and bonds have being doing well and therefore investors may likely be chasing those assets at the expense of gold, he added.

"Gold should benefit as central bankers attempt further measures through more newer, unconventional and untested approaches to revive growth," Mehta said.

According to the latest data available with the Association of Mutual Funds in India (Amfi), Gold ETFs witnessed a net outflow of Rs 79 crore in May and another Rs 69 crore in April.

This takes the total outflow to Rs 148 crore in the first two months (April-May) of the ongoing fiscal, 2016-17.

Besides, the asset base of gold funds plunged to Rs 6,159 crore at the end of May from Rs 6,480 crore in April-end.

The mutual fund sector has 14 gold-based schemes, which have been in the market since 2006-07.

The demand for gold ETFs has steadily fallen in the past few years. These products have seen outflow as gold prices are correcting and equities have given good returns to investors.

Retail investors have put in more money into equity and mutual funds in May. Equity and equity-linked saving schemes saw an infusion of over Rs 4,721 crore.

Overall, mutual fund schemes have witnessed an outflow of over Rs 58,000 crore during the period under review.