Even as market experts debate on where the stock market indices will go on from here, several investors in mutual funds seem to have already taken a smart call. These investors have withdrawn their money from equity schemes as they sensed that the market may not sustain its momentum in the coming months. The pull out, which could be partly driven by the high customary cash demand during the Diwali week, saw the highest-ever monthly redemption in October.
“In a buoyant market like this, there will always be a set of people who feel that they have made a lot of profit in a short time,” says SBI Mutual chief marketing officer RS Srinivasan Jain. “These guys will always book some profits,” he said. However, he added that the redemption amount at his fund house has been modest at best and he sees this number stabilising from hereon.
Data on the Amfi website reveals that during October, investors in equity mutual funds redeemed the highest amount ever in a single month, as they withdrew more than Rs 12,500 crore put together. This trend has been on for some time now as investors redeemed around Rs 7,700 crore and Rs 7,000 crore worth of units in September and July, respectively.
However, a closer look at the numbers shows that some new money has also been flowing into equity schemes. Thanks to eight new fund offerings as well as fresh inflows into existing schemes, more than Rs 12,200 crore was mobilised by funds. As a result, net outflows from funds for October were average at just over Rs 300 crore.
Mr Jain of SBI Mutual says that there is bound to be some duplication of data in the Amfi numbers for redemption of units. For instance, if an investor withdraws money from one fund and shifts it to another equity fund, the amount will figure in redemption as well as fresh flows. Hence, the numbers should be taken with a pinch of salt, he feels.
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