As Indian stock market scaled new highs, people continued to book profit in equity-linked mutual funds for the fifth straight month in November. People pulled out Rs 12,917 crore from equity mutual funds in November. However, people interest in debt mutual fund propelled the Assets Under Management (AUM) of mutual fund industry to Rs 30 lakh crore.
"We still believe that there is significant amount of money that can come back to the market in the event of any correction. The medium to long term potential of the equity markets remain strong," G Pradeepkumar, CEO of Union AMC, said.
In November, 3.4 lakh new SIP were also added to the mutual fund industry.
Investors are resorting to profit booking in equity mutual funds due to new heights scaled by the Indian stock market, said Association of Mutual Funds in India (AMFI) chief executive NS Venkatesh, adding that his profit could be seen in coming days too.
On the contrary as per the AMFI data, debt mutual fund has seen increase in inflow as investors added Rs 44,984 crore in debt mutual funds in November alone.
More than 10 lakh new SIP accounts were opened in November, while 7.24 lakh account matured too, said the data.
"Accommodative credit policy stance, continuous global liquidity flows, coupled with improved economic sentiment driven by healthier corporate earnings and positive GDP growth forecast has led to Indian mutual fund industry AUMs crossing historic highs and touching highest ever Rs 30 lakh crore landmark," N S Venkatesh, Chief Executive of Amfi, said.
In his reaction to the release of data, Akhil Chaturvedi, Associate Director & Head of Sales, Motilal Oswal Asset Management Company said, "November 2020 has be a one the better months for equity markets with Nifty 50 at all-time high and a very strong recovery in the mid and small cap indices, with mid and small caps after three years of negative returns turned positive for the CY 2020. We have also seen record FII buying to the extent of 60k cr in month of November backed by strong liquidity, lower interest rates and increased interest in emerging markets."
Giving his analysis, Chaturvedi said, "The markets are clearly pricing in the positives of recovering economic data points, lower interest rates and sign of vaccine coming out very soon and all of this leading to a very positive impact on earnings in coming quarters and more specifically FY 22."
He added, "Now, optically from the lows of March 2020 correction markets have given some stupendous returns and leading to belief that markets are over-heated and therefore outflow from equity mutual funds to the extent of 35k cr highest ever seen. Adjusted for inflows of 17k cr (50% of which would be SIP flows) the net redemptions have been almost 18k cr."
However, he added that all these outflows would not have gone completely out of equities as an asset class. He said, "They probably moved to direct equities as investors have had some successes in past few months investing directly, some part of this liquidity could have also flown to real estate with renewed interest amongst genuine buyers wanting to own home at lower interest rates and falling taxes and prices. There also investors who would be sitting on cash to deploy once again post any meaningful correction in near future."
As for the future, Chaturvedi said, "Similar trends have been witnessed in past as well, it will be interesting to see market movements vs. domestic flows trend in next few months and what would be the trigger points which would lead retail/ HNI investors come back to equities once again meaningfully.”