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Investors pulled out Rs 2,910 crore from equity funds in May, but put in Rs 20,919 crore in debt funds, the Association of Mutual Funds in India data, released on Monday, revealed.
The redemptions came even as the Nifty rose 1.3 per cent last month, Dhirendra Kumar, CEO of Value Research India, told Business Line the massive flow into fixed income debt funds in May is the flavour of the season. “High interest rate and lower inflation brought opportunistic and mature investors into the segment. The lure of further lowering of interest rate and fall in inflation have attracted investors to this segment,” the fund observer said.
On the other hand, Kumar pointed out, the fund investors have firmly been moving out of the equity mutual funds. “The gullible investors have burnt their fingers in 2008-09 and exited. They are unlikely to return in the near future even if the key indices remain at their high. Scrupulous investors are also decidedly pulling out gradually,” he added.
According to Jaideep Bhattacharya, Managing Director of Baroda Pioneer Asset Management Ltd, profit-booking by investors is one of the key reasons for the redemptions in equity mutual funds.
Retail investors are also looking at bank fixed deposits and fixed income products of mutual funds.
“Most of equity investors are booking profits, some are going into debt schemes while some others are locking into bank deposits as the market perceives interest rates to come down in the coming days,” Bhattacharya told Business Line .
Redemption is a part of the business model, however, this should be compensated by fresh flows. “The market is volatile and investors are waiting for a correction. New flows are not coming in to the extent one would expect. Even in June, on a day-to-day basis, redemptions continue,” he said.
There has been a consistent outflow from equity mutual fund in the last two years. While there might not be a huge reversal in the trend in the immediate future, the quantum of outflows might come down, said an industry official.
Kumar, however, felt that the domestic investors are yet to develop an interest in the highest yielding segment with a currency play — international funds. “Franklin Templeton fund investing in US ($-denominated) securities has yielded a return of 25 per cent till date (June 9). But the fund could collect only Rs 192 crore,” Kumar said.
shobha.roy@thehindu.co.in
jayanta.mallick@thehindu.co.in
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