Equity fund redemptions rise in July

Investors were spooked by the recent market volatility which has led to negative returns. Things have turned investors more cautious which can be seen with the redemptions in the mutual fund. Equity funds which were darling of the investors for the last couple of years have been witnessing redemptions.

As per latest AMFI data, redemptions of the equity schemes have increased by 13 per cent in the month of July 2018 even though markets have reached their all-time high. Redemption rose to Rs. 11,628 crore, where total inflows rose to Rs. 21,080 crore. During the month, net inflow in these funds has dropped marginally by 2.2 per cent to Rs. 9,452 crore.

The key reason behind this is the market rally was not a broad based rally. The markets were still volatile. Even though benchmark indices Nifty and Sensex were rallying, the same vigour was not seen in the mid-cap and small-cap indices. Not all the Sensex and Nifty constituents were supporting the rally, there are some selective large-cap stocks which were rallying and pushing the index upwards. So owing to this, the returns for the investors were curtailed. If we see the SIP returns of the latest six months, many equity funds are struggling to offer a positive return.

Even the macroeconomic conditions and global markets are not promising a great near-term outlook. So the redemptions from equity funds are increasing month on month. Indicating that investors are taking a pause from their investment activity to understand the market direction. But being a mutual fund investor, keeping a long-term view can be a good option rather than pausing the investments. If one can just see through the current market risk, he can definitely benefit with the recovery.