Equity mutual fund plans in India witnessed the highest net outflow in July. This peak is the first time to achieve over the past six years. The pandemic-induced low hits could have contributed to the event, as Investors requested for holdings redeem amid a rally in stock markets. Redemption pressure from investors further followed the peaking outflow in the equity fund scheme. However, the situation could be a good opportunity instead.
Outflows and inflows update
As reported by Mint, Association of Mutual Funds in India revealed on Monday a net outflow of ₹1,921.8 crore in July. A comparably highest ever since March 2014. The July net outflow was also the first since March 2016 for equity mutual fund schemes.
Last March, inflows into equity schemes hit the peak with a net of ₹12,175.04 crore. Starting from June, the inflows slow down into ₹240.55 crore, the lowest in almost four years. In comparison, a ₹8,133.21 crore worth of net inflows flowed into the equity schemes in July last year.
Redemption pressure in India’s equity mutual fund schemes
Systematic Investment Plan (SIP) fluctuation is deepening redemption pressure. Mint reveals India scores a 22.9% surge in equity mutual fund schemes’ net redemptions from ₹13,520.03 crore from the previous month to ₹16,622.01 crore in July. In addition, SIP inflow records a drop from ₹7,927.11 crore in June to ₹7,830.66 crore in the following month.
Himanshu Srivastava, associate director, and manager, Morningstar India revealed the multi-cap fund category scores the worst, followed by mid-cap and value fund categories. In recent times, investors are expected to book profits due to the surge in equity markets across segments. Srivastava further explains this scenario may become a good exit opportunity. Equity markets are currently doing well, the stable scenario is found in the fixed income markets, and hybrid schemes also witnessed significant net outflows.
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