It was Christmas time, and Santa seemed rather generous this year — to stockholders. As foreign funds kept pouring into India, sending stocks to dizzying valuations, local investors decided to book some profits.
So, they sold equity mutual funds worth ₹10,147 crore in December. This figure is lower than November’s ₹12,919 crore but it is the sixth consecutive month of outflows from equity mutual funds, with investors pulling out a total of ₹33,003 crore cumulatively.
Retail investors, however, continued to add to SIPs with collections through this route rising to ₹8,418 crore, compared to ₹7,300 crore in the previous month.
Due to the rise in the markets and inflows of ₹13,862 crore in debt funds, assets under management of the mutual fund industry continued to surge and touched ₹30.96 lakh crore.
The Nifty 50 moved up by 83% from its March 23 lows till December end and with valuations looking high, many HNIs believe it is prudent to book profits and sit on the sidelines till the market corrects. It is believed that a lot of new first-time investors have gradually started coming through the SIP route or are allocating to equities in a staggered fashion.
The sharp rise in the markets is worrying investors with many believing it is not sustainable.
Thematic, dividend yield and international funds were some categories that saw inflows due to NFOs and investor interest to diversify geographically. Thematic funds saw inflows of ₹3,412 crore, dividend yield ₹1,490 crore while international fund of fund saw inflows of ₹1,039 crore.
All diversified equity mutual fund categories continued to see outflows. Large-cap funds saw the highest outflows of ₹3,876 crore followed by multicaps at ₹3,540 crore. Passive index funds most of which are large-cap oriented and have low cost saw outflows of ₹93 crore. Small cap and midcap funds saw outflows of ₹2,332 crore while ELSS schemes saw outflows of ₹1,275 crore.
Hybrid mutual funds that invest in a mix of debt and equity also saw outflows of ₹5,932 crore. Within this category, arbitrage funds where returns have dipped to 3-4% continued to see outflows losing ₹770 crore.
Some interest has come back amongst low-risk investors in conservative hybrid funds category that put between 10% and 25% in equities with the balance in debt and hybrid funds saw inflows of ₹81 crore.
As returns from low-risk liquid and overnight funds dwindle to 2.5-3.5% investors are moving up the duration ladder. This led to inflows of ₹1,818 crore in medium term funds, ₹3,953 crore in short duration funds and ₹8,610 crore in corporate bond funds.