Mutual funds continued their selling spree in Indian equities for the sixth straight month, withdrawing Rs 30,760 crore in November. Market experts believe that the trend will continue unless markets fall.
With this, net withdrawal by mutual funds has reached to over Rs 28,000 crore in the first 11 months of 2020, data available with the Securities and Exchange Board of India showed.
The markets, despite the withdrawals from mutual funds in the last few months, have continued to rise as flows from foreign portfolio investors have been robust.
FPIs have put in over Rs 1.08 lakh crore in the Indian equity markets during January-November period of 2020.
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“With markets touching new highs and Nifty PE (price-to-earnings) valuations crossing 36 times, there is profit booking happening. This is visible from the increased ‘outflow’ number compared with September -October,” said Vidya Bala, co-founder of PrimeInvestor.in.
The gross inflows have also not picked up much as the impact of Covid-19 on the individual investor’s income is yet to normalise, she added.
Omkeshwar Singh, head at Samco Securities, said there has been a very sharp rally in November coupled with markets at an all-time high, which prompted many investors to book profits as they are not very comfortable at this level and the same can be visible in the latest data.
According to the data, mutual funds pulled out Rs 30,760 crore from equities in November. This has taken the outflow to over Rs 68,400 crore since June.
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Mutual funds withdrew Rs 14,492 crore in October, Rs 4,134 crore in September, Rs 9,213 crore in August, Rs 9,195 crore in July and Rs 612 crore in June.
However, they invested over Rs 40,200 crore in the first five months of the year (January-May). Of this, Rs 30,285 crore was invested in March.
Divam Sharma, co-founder at Green Portfolio, said the rise in markets and higher valuations have triggered the recent withdrawals from equities.
Going ahead, Bala said, “we expect equity outflows to continue to remain tepid until there is some correction in the equity market”.
Kaustubh Belapurkar, Director Manager Research at Morningstar India said net inflows into equity schemes from investors, which could be triggered by a market correction or a longer term visibility of pick-up in economic growth, wouldresult in net positive investments by MFs in stocks.
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Green Portfolio’s Sharma said decent correction would induce investors to increase equity allocations going forward.
“Robust Q2 performance by companies and a better expected Q3, rising GST collections, and positive liquidity from global investors shall arrest any significant withdrawals from equities in the near term,” he added.
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