Equity MFs log net outflows in Oct for fourth month as investors book profit on market rally

Equity mutual funds continued to witness outflows in October — for the fourth month in a row — as investors used the market rally to book profits.

Data from the Association of Mutual Funds in India (AMFI) reveal that equity funds outflow more than trebled to ₹2,725 crore last month against ₹734 crore in September, led largely by the redemption of ₹1,903 crore (-₹1,144 crore) in multi-cap funds, which were impacted by a change in SEBI’s investment norms. Value contra funds also registered an outflow of ₹1,201 crore (-₹489 crore).

Equity oriented mutual funds have witnessed a net outflow of ₹9,939 crore since July. Large- and mid-cap funds recorded net outflows of ₹551 crore (-₹576 crore) and ₹556 crore (-₹68 crore), respectively, while the trend in small-cap funds reversed to an outflow of ₹484 crore in October against an inflow of ₹133 crore in September.

The outflow from equity funds would have been higher were it not for an inflow of ₹2,215 crore via focussed funds, which saw many new fund offers launched last month.

Redemptions in hybrid funds moderated to ₹1,682 crore (-₹4,219 crore) as balanced hybrid funds witnessed an outflow of ₹2,391 crore (-₹2,004 crore).

Inflows through systematic investment plans (SIPs) were up marginally at ₹7,800 crore (₹7,788 crore) while SIP AUM (assets under management) increased to ₹3.42-lakh crore (₹3.36-lakh crore).

Himanshu Srivastava, Associate Director, Morningstar India, said the net outflow in October was largely due to profit booking by investors on the back of a surge in equity markets. Multi-caps continued to witness net outflows for the fifth month in a row and were the worst hit, followed by value funds, he added.

Inflows up in debt funds

Inflows into debt MFs rose sharply to ₹1.1-lakh crore against an outflow of ₹51,962 crore logged in September, with an inflow of ₹19,583 crore (-₹65,951 crore) in liquid funds and over ₹15,000 crore in money market, short duration and corporate bond funds.

Jean-Christophe Gougeon, Director, Sharekhan, said the net debt collection has been gaining traction, indicating that MF investors are currently cautious and an improvement on the Covid front could bring them back to equity slowly.

Overall, the AUM of mutual funds was up 5 per cent at ₹28.22-lakh crore (₹26.86-lakh crore).

NS Venkatesh, CEO, AMFI, said the MF investment trends reflect a revival in the economy with green shoots amply visible. This will make Indian equity markets an attractive investment destination over the long term, he added.