Investors of equity mutual funds (MFs) are laughing all the way to the bank. With the markets trading close to their all-time highs, investors have pulled out a record Rs 12,804 crore from equity MF schemes in September, which is about 50% more than the previous high hit in October 2007.
Equity MF redemptions surged 63.7% month-on-month in September, pushing fund houses to sell stocks to meet the huge spurt in exits. Fund houses net sold stocks worth Rs 7,236 crore to meet redemptions in September, the highest in 2010, Sebi data shows.
The sell-off in September is more than twice that of August and has not lost steam in October. Fund managers have net sold equity to the tune of Rs 2,573 crore so far in the month.
"It was almost like an avalanche. Large redemption requests came when sensex crossed 20,000 points," said a senior industry official. "Most investors, who wanted to redeem, have done it now since investments were made when sensex was trading between 15,000 and 21,000 points," said Jaideep Bhattacharya, chief marketing officer, UTI MF.
A lot of investments that came through new fund offers in 2006-08 are also being redeemed. "The markets have run up quite sharply. So, investors are pulling out money from equities and allocating it to monthly income plans, liquid funds and bank deposits," he said. Investors are also channelling the money into IPOs for short-term gains, say industry officials.
The sudden spurt in redemptions has resulted in a sharp jump in net outflows, which have touched Rs 14,624 crore so far this year. Net outflows from equity schemes have topped Rs 7,011 crore in September alone, more than double that of the preceding months, Association of Mutual Funds in India (AMFI) data shows. In all, investors have made total redemptions of Rs 63,948 crore in the first nine months of the calendar year, AMFI data shows.
However, redemptions have started to come down in the past week, say industry officials. "If sensex sees a mild correction, money would start flowing back," an official said. But some analysts said that there would be more redemption when sensex crosses 21,000 points. With nearly 50% of diversified equity mutual funds yet to recover lost ground, officials believe that another round of redemptions would happen once the market moves up.
Source: http://timesofindia.indiatimes.com/articleshow/6745044.cms?prtpage=1
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