 "Some MF investors take money off the table")
Mutual fund (MF) investors might have started taking money off the table with the market having soared past the 28,000-mark in November.
Last month, equity MFs saw gross redemptions worth around Rs 6,000 crore, the highest in four months. Those in the sector say savvy high net worth individuals (HNIs), having made good returns this year, booked profits on their investments.
Dhirendra Kumar, chief executive officer (CEO) of Delhi-based fund tracking firm Value Research, said: “These are investors who came early and put in money when the markets were low. They have made substantial money on their investments and are using newer market highs to book some profits.”
For instance, every Rs 100 invested in any category of equity schemes a year earlier would have a value of anywhere between Rs 130 and Rs 181 now.
G Pradeepkumar, CEO of Union KBC MF, said: “As markets rally, there will always be some investors who want to partially book profits. This is what must have happened in November.”
Another factor which prompted higher redemption from equities was fixed income products turning attractive from a short-term perspective, say sector executives.
As anticipations for an imminent interest rate cut started to get built into bond prices in November, reasonable flows toward fixed income products were witnessed.
During the month, 26 schemes in this category were launched, garnering nearly Rs 3,700 crore.
Last month, equity MFs saw gross redemptions worth around Rs 6,000 crore, the highest in four months. Those in the sector say savvy high net worth individuals (HNIs), having made good returns this year, booked profits on their investments.
Dhirendra Kumar, chief executive officer (CEO) of Delhi-based fund tracking firm Value Research, said: “These are investors who came early and put in money when the markets were low. They have made substantial money on their investments and are using newer market highs to book some profits.”
For instance, every Rs 100 invested in any category of equity schemes a year earlier would have a value of anywhere between Rs 130 and Rs 181 now.
G Pradeepkumar, CEO of Union KBC MF, said: “As markets rally, there will always be some investors who want to partially book profits. This is what must have happened in November.”
Another factor which prompted higher redemption from equities was fixed income products turning attractive from a short-term perspective, say sector executives.
As anticipations for an imminent interest rate cut started to get built into bond prices in November, reasonable flows toward fixed income products were witnessed.
During the month, 26 schemes in this category were launched, garnering nearly Rs 3,700 crore.
Kumar says even if one invests now in fixed income MF products, one can expect almost a guaranteed return of 14-15 per cent.
Further, continuous popping up of closed-end equity schemes, often attached with higher commissions for distributors, have brought in a significant amount of churning of investors' money. Every time a distributor made investors close their existing accounts, it add to the redemption figure.
In November, three closed-end equity products from the stable of DSP BlackRock, ICICI Pru AMC and Sundaram MF were offered to investors. These together gathered Rs 875 crore of investor money.
“All this can't be fresh money. At a time when regular schemes are offering trail commission of 40-60 basis points (0.4 to 0.6 per cent), a newer closed scheme is offering distributors four to seven per cent. Why would not the distributors churn the money?” said a marketing head of a large fund house.
However, sector officials do not see the overall trend changing, as a majority of the inflows continue to come in the equity category. For instance, in November alone, gross sales in equity schemes remained strong at Rs 11,000 crore. They expect that as the markets trend higher more investors will pump money into stocks.