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Gold exchange-traded funds (ETFs) witnessed a net outflow of ₹248 crore in February, making it the second consecutive month of withdrawals as investors preferred equities over other segments on record SIP flows.
Net outflows from the gold ETFs were at ₹452 crore in the month of January. Prior to that, the asset class had seen a net investment of ₹313 crore, according to the data of Association of Mutual Funds in India (Amfi).
Despite the outflows, the category witnessed an increase in net assets under management (AUM) of gold ETFs to ₹18,727 crore at the end of February from ₹17,839 crore in January-end. Also, the segment saw a surge in the number of folios by 3.09 lakh to 37.74 lakh during the period under review.
“This move could be directed towards gold assets being considered as a tool for diversification of the portfolio by the investors and a hedge against market volatility,” Priti Rathi Gupta, Founder, LXME, said.
She attributed the latest outflow from gold ETFs to two factors — investors could be diverting their investments from gold instruments to equity as a portfolio rebalancing strategy due to the attractive returns garnered by the equity markets. Also, investors view this market correction as an opportunity to enter the markets.
"Secondly, given the rise in prices of gold, traders may have booked the profits and exited their trades for managing their margin money for trade in other asset classes,"she added.
Kavitha Krishnan, Senior Analyst - Manager Research, Morningstar India, said that investors have almost always favoured gold as an asset that can be used to mitigate risks and diversify their investments.
"With equities garnering the most flows and SIP (systematic investment plan) touching record highs, investors seem to prefer this segment over the others, including gold ETFs. Moreover, investors also seem to be booking profits by redeeming their investments, given the uptick in gold prices," she added.
In the entire 2021, gold ETFs attracted ₹4,814 crore primarily due to firming of inflation and elevated market valuations. The inflow was lower compared to ₹6,657 crore seen in 2020.
Gold ETF, which aims to track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion.
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