Equity MFs witnesses outflow for a fourth consecutive month

According to the monthly report of the Association of Mutual Funds in India (AMFI), equity mutual funds have been witnessing outflows continuously for the fourth successive month as investors continued booking profits. The benchmark indices have recovered most of their losses amid pandemic.

Equity funds saw a net outflow of Rs 2,724.95 crore in the month of October 2020 as against an outflow of Rs 734 crore in the month of September 2020.

For the past few months, we can see net inflows from equity mutual funds falling. Initially, this was prominently due to the impact of the pandemic on the businesses. However, post the ‘unlocking’ of the country, equity markets began to soar. Nifty 50 rebounded almost 65 per cent from its March 2020 lows. And the net inflows have been negative since then as investors started booking profits. The profit booking can also be attributed to the fear of a second wave of COVID-19 as the US and Europe once again recorded the highest number of cases.

What does the sub-category tell?

In the month of October 2020, almost all the equity-oriented mutual funds witnessed net outflows. In fact, since April 2019, multi-cap funds saw its biggest outflows and the fifth month of consecutive outflows for these schemes. Even the large-cap funds continue to witness the fifth straight month of outflow in the month of October 2020.

In the coming months, multi-cap funds might see much of the churn as Securities & Exchange Board of India (SEBI) has announced the introduction of Flexi-cap as a new category in the equity schemes. This will lead most of the multi-cap funds to reclassify themselves as Flexi cap funds.

Read here:

https://www.dsij.in/DSIJArticleDetail/ArtMID/10163/ArticleID/15707/Reclassification-of-multi-cap-funds-begins

Mid-cap funds saw a net outflow for the fourth successive month. Whereas, after seeing a net inflow for two months in a row in the month of September 2020, it saw outflows in the month of October 2020.

SIP flow

Contributions via systematic investment plans (SIP) rose marginally in the month of October 2020 over the preceding month. An increase in both, the SIP contribution and SIP assets under management (AUM) during the month of October 2020 as well as continuous slowing of outflows in equity funds strengthened the confidence of retail investors in mutual funds. This can be very well attributed to improving high-frequency economic indicators.