August gold ETF outflows highest in five years on profit-booking

Rupee depreciation and a spurt in international gold prices triggered surge in domestic gold price.

Written by Ashley Coutinho | Mumbai | Published: September 11, 2013 2:51:25 am

Gold ETF schemes posted their biggest monthly outflow in more than five years in August as the rupee’s depreciation boosted domestic gold prices,prompting investors to book profits in these funds.

The gold ETF category saw outflows of Rs 588 crore in August,latest data put up on the website of Amfi,the mutual fund industry body,show. This is the highest net monthly outflow since March 2008.

The rupee depreciated as much as 8% against the dollar in August. The depreciation,coupled with a spurt of about 5% in international gold prices,triggered a surge in domestic gold prices during the month. The hike in the customs duty on gold imports also pushed up prices to some extent,said experts.

“Investors who could not book profits from gold ETFs during the previous highs chose these highs to book profits,” said Dhruva Chatterji,senior investment analyst,Morningstar India. Domestic gold prices touched a record high of R32,943 per 10 grams on August 29.

Another possible reason for the ouflows picking up in August is the reluctance of fund houses to accept fresh inflows into the category following RBI’s new guidelines, dated July 22,aimed at restricting gold imports. The new guidelines have made it difficult for fund houses to source physical gold as banks have decided to stop selling gold to MFs pending clarity on the matter,according to fund officials. Funds are required to hold physical gold equivalent to the value of units sold to the investors.

As of August 31,the assets under management of gold ETFs amounted to R11,828 crore,up 10.8% from R10,669 crore in the previous month. In the last three months,gold ETFs have seen outflows of R901 crore.

Among other categories,equity schemes saw net inflows of R467 crore in August compared with outflows of R1,652 crore in the previous month. MF equity schemes have seen inflows in only 16 months after the entry load was done away with in August 2009.

“We have seen this trend in the past as well; whenever the market corrects,a substantially number of investors put in money,” said Chatterji. The benchmark BSE Sensex fell about 4% in August.

Sales of new closed-ended income funds fetched the industry R18,861 crore in August,the bulk of which was collected through fixed maturity plans (FMPs),according to market participants. FMPs were back in favour as short- term rates for three-month and one-year CDs rose about 200 basis points to 10-11% in the two months to August.

Net inflows into liquid schemes were healthy,at R32,123 crore in August against net outflows of R45,296 crore in the previous month.

The average month-end AUM of the mutual fund industry was flat in August,rising marginally to R7.66 lakh crore from R7.60 lakh crore in the previous month.

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