Mutual funds witness net redemptions after nearly two years
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Mutual funds witness net redemptions after nearly two years

To honour redemptions, mutual funds had to liquidate their holdings in the capital market after nearly two years. Mutual funds pulled out Rs 2,698 crore in April 2014, after which they continued to infuse funds till March 2016 when they were net sellers to the tune of Rs 10,199 crore.

  • April 8, 2016  
  • |  
  • UPDATED   18:58 IST

Equity mutual funds witnessed net redemption of Rs 3,206 crore in March after 23 months of net inflow. Total redemptions from equity funds during the same month stood at Rs 14,319 crore. Investors withdrew despite a 10 per cent rise in the Sensex during March after correction of nearly 12 per cent in the first two months.

To honour redemptions, mutual funds had to liquidate their holdings in the capital market after nearly two years. Mutual funds pulled out Rs 2,698 crore in April 2014, after which they continued to infuse funds till March 2016 when they were net sellers to the tune of Rs 10,199 crore.

Rajiv Shastri, Managing Director & CEO, Peerless Mutual Fund says, "Rather than look at this as investors exiting the market, we feel that since this has happened in the month of March, it may be more related to tax planning for the financial year. We expect positive flows to resume from the month of April."

While mutual funds withdrew money from markets to cater to redemption requests from their investors, foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) infused Rs 22,849 crore into the Indian equity market, the highest since January 2013.

FIIs and FPIs had invested Rs 24,299 crore in December 2012. "Historically, high inflows by FIIs have mostly always been followed by outflows by mutual funds.

March 2016 has witnessed the highest Sensex return in the past seven years. These redemptions can be seen as a short-term phenomenon of profit booking opportunity by the investors after a disappointing year," says Vikas Vardhan, Associate Analyst, Value Research India.

Despite, MFs pulling out funds last month, equity markets have seen a growth of 60.95 per cent in investments by mutual funds last fiscal as compared to FY 2014/15.

Mutual funds have infused Rs 64,519 crore and FIIs pulled out funds equal to Rs 14,172 crore from equity markets during 2015/16.