As markets rally, redemption by mutual fund investors from equity schemes rises in last 4 months

While the pace of mobilization of funds through equity-oriented mutual fund schemes in the first seven months of 2023 has been steady, redemption from equity-oriented schemes has increased in the April-July period.

In January-March 2023, the total gross fund mobilised through equity mutual funds was Rs 100,550 crore and redemption was Rs 51,783.30 crore. During April-July, funds mobilised through equity schemes stood at Rs 132,289 crore and redemption was to the tune of Rs 106,305.38 crore, as per the Association of Mutual Fund (AMFI) data.

Higher redemption resulted in a decline of net inflows into equity mutual fund schemes from April to July as compared to the January-March 2023 period. While the total net inflows in equity schemes in the first four months of the current fiscal was Rs 25,983 crore, it was Rs 48,766.29 crore in January-March 2023.

“It’s all about asset allocations. Investors have become quite smart in the way they have been managing trends. In months when the markets have either been flat or have been on the decline, investors are going for SIPs and adding some lump sum money. In months when the markets are at all-time highs, while SIPs have been continuing, investors also seem to be booking profits,” said Manish Mehta, Head of Sales and Marketing, Kotak Mahindra AMC.

Between April-July this year, domestic stock markets have risen by around 14 per cent. The benchmark indices -Sensex and Nifty – have scaled new highs. The rally in the markets has been driven by sustained inflows from foreign institutional investors (FIIs) due to the country’s strong macroeconomic fundamentals.

In April-July, FIIs bought Rs 1.49 lakh crore of domestic equities. On the other hand, domestic institutional investors (DIIs) net bought around Rs 650 crore of equities in the same period.

On July 20, while the Sensex touched a lifetime high of 67,619.17, the Nifty rose to a record high of 19,991.85.

In July, net inflows into equity-oriented mutual fund schemes stood at Rs 7,625.96 crore compared to Rs 8,637.49 crore in June. Within equity schemes, small-cap funds saw the highest inflows of Rs 4,171.44 crore on a net basis. Net inflows into multi-cap funds and large and mid-cap funds were Rs 2,500.47 crore and 1,326.77 crore, respectively, AMFI data showed.

Debt mutual fund schemes saw net inflows of Rs 61,440.08 crore in July as compared to an outflow of Rs 14,135.52 crore.

The mutual fund industry’s net asset under management (AUM) stood at Rs 46,37,565 crore in July as compared to Rs 44,39,187.2 crore in June.

In July, SIP contribution touched an all-time high of Rs 15,244.73 crore from Rs 14,734.45 crore. The number of SIPs registered in July was 33.06 lakh as against 27.78 lakh.

According to AMFI CEO NS Venkatesh, the rise in the number of SIPs is contributed by an increase in investor awareness. Retail investors are not investing directly in equity markets, but are coming through the mutual fund routes, he said.

“Most of the investors are first-time investors so they are trying to test markets through the mutual fund route. Secondly, the market has moved tremendously forward so there is an aspiration that they would like to get a little bit of share from the markets on their investments. Hence, they are going ahead and investing into the equity market through the mutual fund SIP route,” he said.

Also, higher returns on equity-related instruments compared to rates offered on fixed deposits are also driving investors to SIPs, Venkatesh said.

The number of SIP accounts stood at the highest ever at 6,80,52,826 for July as against 6,65,37,033 in June.

The SIP AUM stood at Rs 8.32 lakh crore in July, compared to Rs 7.93 lakh crore in June.