Market moves: Mutual funds sold Rs 30,000 crore worth of equities in November

Domestic mutual funds have sold Rs 30,000 crore worth of equities in November. This is the highest monthly amount sold by mutual funds over the last ten years. The selling comes during a month in which the Nifty and Sensex scaled fresh highs.

Selling at highs

During March this year, markets tanked nearly 40 percent. But the rise in the subsequent months was equally swift as the Sensex rose nearly 70 percent to 45,000 levels. A combination of high liquidity and low interest rates drove the rally.

So, why are MFs selling then?

“This selling could be because of a combination of factors. Amid the market run-up, fund houses are taking money off the table. Also, net asset values of several schemes have seen an uptick during the rally, which may have led to investors redeeming their investments,” says Jimmy Patel, managing director and chief executive officer at Quantum MF.

In the current calendar year, domestic fund houses have sold Rs 28,081 crore worth of equities. If the selling continues in December, this will also be the highest yearly selling by mutual funds seen in a decade.

In October, equity schemes witnessed an outflow of Rs 2,724 crore. Between July and October, equity schemes saw net outflows of Rs 9,939 crore.

Industry experts say investors could be taking advantage of the run-up in the markets. With markets at fresh highs, investors may have decided to take some profits or even exit fully during the rally to  reduce their exposure to equity markets.

Diversified equity schemes have delivered healthy returns in the last six months. Data from Ace MF shows that large-cap funds have given returns of 27 percent on an average during this period. Mid-cap and small-cap funds have outperformed spectacularly and have delivered returns of 37 percent and 47 percent, respectively on an average. A mix of  caution and uncomfortably high valuations may have led to such actions.