Equity mutual funds witnessed an outflow of Rs 2,725 crore in October, making it the fourth consecutive monthly withdrawal, on profit booking by investors.
All the equity schemes, barring large- and mid-cap and sectoral funds, have seen outflows, data from the Association of Mutual Funds in India (AMFI) showed on Monday.
However, investors put in over Rs 1.1 lakh crore from debt mutual funds (MFs) last month after pulling out over Rs 51,900 crore in September.
Overall, the MF industry witnessed a net inflow of Rs 98,576 crore across all segments during the period under review, against an outflow of a little over Rs 52,000 crore in September.
The positive inflow from debt funds pushed the asset under management (AUM) of the mutual fund industry to record Rs 28.22 lakh crore at the end of October, from Rs 26.86 lakh crore at the end of September.
According to the data, outflow from equity and equity-linked open-ended schemes was at Rs 2,725 crore in October, much higher than the Rs 734 crore outflow seen in September.
The equity schemes had witnessed an outflow of Rs 4,000 crore in August and another Rs 2,480 crore in July, which was their first withdrawal in over four years. Prior to this, such schemes had attracted Rs 240.55 crore in June.
The net outflows in October could be largely attributed to profit booking by investors on the back of surge in equity markets, said Himanshu Srivastava, associate director (manager research) at Morningstar India.
"The number of folios as well as funds mobilised during the month was higher than September, however, at the same time, the redemption amount too shot up," he added.
Srivastava also said this indicates that while there are new investors who are investing in the markets, the existing investors continue to book profit given the surge in the equity markets across segments in the recent times.
The outflow comes at a time when benchmark indices are at all-time highs, last seen in January 2020. Since the beginning of this year, investors were moving away from mutual funds and investing directly in equities.
"Risk propensity has increased tremendously, which is supported by new demat account openings of more than six million since March 2020. October month outflows could be seen as a case of smart money booking their large gains of the last 6-7 months," said Gopal Kavalireddi, head of research at FYERS.
During October, mutual fund SIP accounts grew to 3.37 crore, leading to a rise in monthly SIP contribution to Rs 7,800 crore, from Rs 7,788 crore in the preceding month.
Further, total SIP's asset base rose from Rs 3.35 lakh crore at the end of September, to Rs 3.42 lakh crore at the end of October.
"Rise in both SIP contribution and SIP AUMs during October 2020 and continued slowing outflow in equity schemes reinforce the retail investor confidence in the mutual fund as an asset class," said N S Venkatesh, CEO of Amfi.
He added that this trend is reflective in economy improving further with green shoots amply visible, including attractive interest rates, rise in GST collections, digitalisation-driven efficiencies making Indian corporates healthier.
Conducive government policy for attracting FDI and continued surge in FPI investment coupled with favourable geo-political scenario would continue to keep Indian equity markets an attractive investment destination over a long term, Venkatesh said.
Within the equity segment, multi-cap was the worst hit with an outflow of Rs 1,903 crore in September, followed by value fund (Rs 1,201 crore), mid-cap (Rs 555 crore) large-cap ( Rs 551 crore), small-cap (Rs 484 crore) and equity-linked saving schemes (Rs 274 crore).
On the other hand, focused fund saw robust inflow to the tune of Rs 2,215 crore due to two launch of new fund offers, while large- and mid-cap segments witnessed inflows of Rs 257 crore during the month.
The outflow significantly moderated for hybrid scheme category at Rs 1,682 crore for October, compared with Rs 4,219 crore in September and Rs 4,819 crore in August.
On the debt side, surge in the flows was driven by liquid, money market, corporate bond fund, short duration, ultra-short duration, low duration and banking and PSU fund categories.
Besides, investors are opting for safe haven assets with gold exchange traded funds (ETFs) witnessing an inflow of Rs 384 crore.
