Mutual funds witnessed huge redemption of Rs 1.09 lakh crore by investors in March, making it the highest monthly outflow in three years.

According to the data released by the Association of Mutual Funds in India (AMFI) today, liquid or money market witnessed significant outflows, although income funds and non-gold ETFs (Exchange Traded Fund) saw some inflows.

The net redemption of Rs 1,08,951 crore in the last month of FY14 is the highest monthly outflow since March 2011, when mutual funds had witnessed redemption to the tune of Rs 1.27 lakh crore.

Market participants said the redemption was mainly on account of large investments being pulled out by banks in the last month of a financial year while pre-elections outflow could also have been a reason.

In terms of category, liquid or money market witnessed the highest outflow of Rs 1.17 lakh crore in March.

Besides, equity fund saw outflow worth Rs 2,102 crore and Gold ETFs witnessed a pull out of Rs 149 crore.

On the other hand, income fund saw investment to the tune of Rs 7,838 crore, while non-gold ETFs witnessed infusion valued at Rs 3,087 crore.

This outflow has pulled down the average AUM (Asset Under Management) of the country’s 44 fund houses to Rs 8.25 lakh crore at the end of March 31, 2014 from Rs 8.76 lakh crore in the previous three-month period.

Earlier, some mutual funds had come under scanner of the capital markets watchdog SEBI and industry’s front-line regulator AMFI for allegedly window-dressing their fiscal-end assets base through illicit trade.

To ring-fence their AUM from such redemption pressure, some mutual funds tend to park their assets with large investors to meet their redemptions and buy them back in April.

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