Rallying of Markets Led to Higher Redemptions in November 2019
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The mutual fund inflow went on the negative side last month as there was a considerable rise in the number of investors cashing in on the markets rallying this November. The net equity inflow stood at Rs 1,690.48 crore. Possibly, the investors are worried about the economic slowdown and hence, redeemed when markets rallied. 

The Association of Mutual Funds in India (AMFI) released the data of November 2019, and it shows that the net inflow in November 2019 is short by its previous year’s inflow by a whopping 79.91%. 2018’s November saw an inflow of Rs 8,414 crore. Also, this November’s inflow is 72% lower than its previous month’s inflow of Rs 6,037.78 crore.

The redemption of equity funds had touched Rs 11,025.26 crore in October 2019, and it reached a whopping Rs 16,216.66 crore in November, which is the highest in the last twenty months. This development is possibly due to benchmark equity indices gaining about 1.6% in November 2019. 

Mutual fund investors have realised their investment as November 2019 saw markets breaching fresh highs. Relentless redemption led to the steep fall in the net inflows last month. However, the investors are expected to enter the markets once again when the markets go down.

This is not the first instance of investors pulling out when the markets have soared. This scenario is very common as investors tend to realise gains on their investment when markets shoot up. They fear market correction and hence, decide to pull out to book profits. 

Also Read: Things to Consider While Investing in Mutual Funds

The foreign portfolio investors (FPIs) kept the equity markets resilient in November as they pumped in Rs 2.9 billion. On the other hand, domestic investors, including insurance companies and mutual funds their equity holdings of worth Rs 7,970.29 crore. This sell-off is the highest in the last eight months. 

The contributions from the systematic investment plans (SIPs) was about Rs 8,273 crore in November 2019 while it was Rs 8,246 crore in October. Investing in mutual funds through SIPs is popular among millennials as they allow investors to invest small fixed amounts periodically. 

Investments made in the goal-oriented mutual funds through SIPs by individuals investors have continued to increase steadily. The SIP inflow with asset under management (AUM) has touched its all-time high at Rs 3.12 trillion. Despite net equity inflow falling sharply in November, the overall AUM has touched Rs 27 trillion, which is its all-time high. 

Overnight funds saw an inflow of Rs 20,649 crore in November, which happens to be its highest this fiscal. It has outdone the inflows towards liquid funds for the first time; they received only Rs 6,938 crore. This is possibly due to the Securities and Exchange Board of India (SEBI) imposing graded exit loads on withdrawals made within seven days from liquid funds.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in

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