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Profit booking, channeling investment into other asset classes key reasons for investors exiting MFs: Experts

Experts suggest many retail investors have taken out money from mutual funds and re-deployed those funds directly into equities

March 10, 2021 / 04:18 PM IST

With market near record high and primary market offerings looking attractive, retail investors are choosing to take out money from equity mutual funds, suggest experts. Investors sold equity mutual funds worth Rs 10,468 crore in February. For the previous month, the number stood at Rs 9,253 crore.

Among equity funds, flexi cap funds lost Rs 10,430 crore in February 2021 compared to net redemptions of Rs 5,933 crore in January 2021. This category saw the highest redemptions across equity fund categories, data showed.

“When market touched all-time high in February, it provided a good profit booking opportunity for investors,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India said.

"Equity-oriented mutual funds continued to witness net outflows for eight months in a row. On an overall basis, the net outflow was higher than the previous month. During the month of February 2021, the segment witnessed a net outflow of Rs 10,468.02 crores, which is higher than the net outflow of Rs 9,253.22 crores witnessed in the month of January," he said.

The market has been in an uptrend since March last year with some bouts of profit booking in between. This has attracted many new investors. Experts suggest many retail investors have redeemed mutual funds and re-deployed those funds directly into equities.

Some money is moving towards the primary market as well, which has seen many new companies hitting D-Street.

“Trend is similar to January 2021, equity outflows have been led by profit booking or re-allocation towards alternate investment avenues like real estate / direct equity or IPOs,” Akhil Chaturvedi, Head of Sales & Distribution, Motilal Oswal Asset Management Company told Moneycontrol.

What should investors do?

Experts advise investors to stay put in their respective mutual fund portfolios and avoid booking profit or exiting in case there is no need for extra funds.

One has to realize that direct investing into equities is a full-time job that requires deep insights into businesses, their valuations, and finally having a huge amount of patience, suggest experts.

“This is a common behaviour exhibited by retail investors whenever markets continue to have a spectacular run. Many retail investors start to invest on their own as they feel that they can make money faster than professional fund managers,” Ajay Tyagi, Executive Vice President & Fund Manager – Equity at UTI AMC Ltd told Moneycontrol.

“Our experience has been that only a minority of retail investors possess these insights and as markets mature and evolve further, most investors prefer to grow their wealth in a more predictable and systematic manner by investing their hard-earned with those Mutual Funds which follow rigorous investment processes,” he said.

Harshad Chetanwala, told Moneycontrol suggests investors to hold their long-term equity portfolio and do not exit if there is no need for funds at present.

“Subscription or inflows in equity funds have also increased by 42% in last one month, re-emphasizing that there are investors who are seeing opportunity in the equities and would like to invest for long term as well,” he said.

Disclaimer: The views and investment tips expressed by experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.

Kshitij Anand
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Mar 10, 2021 03:56 pm