Mutual Fund investors pulled out Rs 16,306 crore from equities in February 2021. This marks the ninth consecutive monthly outflow as small investors’ book profit amid a rally in Indian stock market.
Many investors have started direct investing in the equity markets. The success in the rising bull market and poor performance of many mutual funds have led to a high rate of withdrawals from equity mutual funds.
Performance in Financial Year 2021
Equity mutual funds saw the biggest outflow in the past three months even as benchmark indices continue to scale record highs post the Union Budget 2021.
The first 11 months of the financial year 2021 have seen a net outflow of Rs 41,014.6 crore as compared with a net inflow of Rs 83,787.69 crore in the entire financial year 2020.
Equity mutual funds schemes have seen consistent outflows even as markets rebounded from the March 2020 lows rose to record all-time highs. India’s benchmark rose to 7% in February despite a volatility in the last few days. Though this was the best February for the indices in at least two decades, mutual funds investors continue to take their money out.
Trends across sectors
Selling spree continued in the large, mid and small caps funds though at a slower speed. Yet, multi cap funds reported inflows for the second straight month in February 2021.
While the large cap funds saw investors pulling out their money for the ninth straight month in February 2021, small cap funds too saw outflow of money for the fifth month in a row during the same period.
Midcap funds which are also witnessing selling pressure from investors since July 2020 reported the least outflow among all categories.
Dip in SIP Contribution
Systematic investment plans (SIP) which are used by many individual investors as a preferred means of investments in mutual fund schemes continue to see inflows. However, the contribution dipped to Rs 7,528 crore in February 2021 as compared to Rs 8,023 crore in January 2021.
The number of SIP accounts stood at 3.62 crore as compared to 3.54 crore during the same period.
The first 11 months of the financial year 2021 have seen a net inflow of Rs 86,898 crore as compared to Rs 1,00,084 crore in the entire financial year 2020.
Moving to Liquid Funds
Overall, the mutual fund industry across categories saw a net outflow of Rs 1,843.6 crore when compared to Rs 35,586 crore outflow in January 2021. A Rs 17,301.6 crore of net investments in the liquid funds used by companies to park short-term cash cushioned the overall withdrawals seen in the industry during the same period.
Closing Comments
The Mutual Fund industry continues to see net outflow of money in equity funds. We feel that the fact that stock markets are trading near all-time high is playing on the mind of investors. Investors are seeing this as an opportunity to book profits. There is also disappointment by the returns provided by Mutual Funds.
At the same time, there are investors who have also missed out on the recent market rally and are waiting for a market correction to resume investing in funds.
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