As FIIs send stocks to dizzying valuations, local investors book profits in equity MFs for sixth straight month

As FIIs send stocks to dizzying valuations, local investors book profits in equity MFs for sixth straight month

It was Christmas time, and Santa seemed rather generous this year – to stockholders. As foreign funds kept pouring into India, sending stocks to dizzying valuations, local investors decided to book some profits.

So, they told equity mutual funds worth Rs 10,147 crore in December. This figure is lower than November’ s Rs 12,919 crore but is the sixth consecutive month of outflows from equity mutual funds, with investors pulling a total of Rs 33,003 crore cumulatively.

Retail investors, however, continued to add to systematic investment plans(SIPs) with collections through this route rising to Rs 8,418 crore, compared to Rs 7,300 crore in the previous month.

Due to the rise in the markets and inflows of Rs 13,862 crore in debt funds, assets under management of the mutual fund industry continued to surge and touched Rs 30.96 lakh crore.

“HNIs who allocated to equities in April–June have made more than 50% gains and are booking profits,” says Raghav Iyengar, Chief Business Officer, Axis Mutual Fund.

The Nifty 50 moved up by 83% from its March 23 lows till December end and with valuations looking high, many HNIs believe it is prudent to book profits and sit on the sidelines till the market corrects. Raghav believes that a lot of new first time investors have gradually started coming through the SIP route or are allocating to equities in a staggered fashion.

The sharp rise in the markets is worrying investors with many believing it is not sustainable.

“Investors believe this is the peak of the market and are taking money off the table,” says Swarup Mohanty, CEO, Mirae Asset Mutual Fund.

Thematic, dividend yield and international funds were some categories that saw inflows due to NFOs and investor interest to diversify geographically. Thematic funds saw inflows of Rs 3412 crore, dividend yield Rs 1490 crore while international fund of fund saw inflows of Rs 1039 crore.

All diversified equity mutual fund categories continued to see outflows. Large cap funds saw the highest outflows of Rs 3876 crore followed by multicaps at Rs 3540 crore. Passive Index funds most of which are large cap oriented and have low cost saw outflows of Rs 93 crore. Small cap and midcap funds saw outflows of Rs 2332 crore while ELSS schemes saw outflows of Rs 1275 crore.

Hybrid mutual funds that invest in a mix of debt and equity also saw outflows of Rs 5932 crore. Within this category arbitrage funds where returns have dipped to 3-4% continued to see outflows losing Rs 770 crore. Some interest has come back amongst low risk investors in conservative hybrid funds category that put between 10-25% in equities with the balance in debt and hybrid funds saw inflows of Rs 81 crore.

As returns from low risk liquid and overnight funds dwindle to 2.5-3.5% investors are moving up the duration ladder. This led to inflows of Rs 1818 crore in medium term funds, Rs 3953 in short duration funds and Rs 8610 in corporate bond funds.

With the price of gold correcting sharply, investors used the opportunity to buy into the yellow metal adding ETFs worth Rs 430.65 crore.

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