Retail investors sell MF units as Sensex hovers at 20k

May sees 8-month high net outflows from equity schemes

India's retail investors accessing stock markets through mutual funds seem to have lost patience with their investment in equities. They are losing no chances to sell their units whenever markets inch higher.

With benchmark stock indices not showing any decisive and sustained move towards their earlier peaks and slipping after nearing historical highs amid high volatility, investors redeemed heavily in May.

Though redemption from equity mutual fund schemes is not a new phenomena, the last month, in particular, saw one of the largest redemptions in recent times. Investors put redemption requests for units worth Rs 6,580 crore--about 80 per cent higher than the previous three months' average.

Said the chief investment officer (CIO) of a foreign fund house: "During the last few months, several times the Sensex and the Nifty have touched 20,000 and 6,000, respectively. But the indices could not maintain the strength and slipped from there every time. Investors have realised this and they prefer to take the exit route when markets hover around those levels."

The first three weeks of May saw the benchmark indices gallop about five per cent before losing much of the gains by month-end.

Against high redemption, sales of equity products remained poor resulting in a net outflow of Rs 3,357 crore, highest in the last eight months. Last, it was in September 2012 that the sector's equity segment had so high outflows.

The rise in net selling by equity fund managers during the month was an indication of profit booking by investors. According to the data available with the Securities and Exchange Board of India, May witnessed net selling of shares worth Rs 3,508 crore by fund managers, slightly above the amount investors redeemed.

"There is no business in equities at all. Fresh money inflows continue to be dismal," says the national sales head of a private bank-sponsored asset management company. The overall sales of equity-related products stood at Rs 3,223 crore, which is far lower than what the sector witnessed in the first three months of 2013.

Earlier this year, as some positive sentiments got in, the mutual fund sector had seen higher inflows and lesser redemptions. In fact, in March, the inflows were net positive at Rs 768 crore in equities. That had raised hopes among industry officials that the positive transaction would continue. But what followed in later months was again the same story.

"Investors in equities do not come for 5-10 per cent return. They have a mindset of returns of 20 per cent or above, which is not happening," says Akshay Gupta, chief executive officer of Peerless Mutual Fund. As on May 31, equity assets under management (including ELSS) stood at Rs 1.75 lakh crore, constituting 21 per cent of the sector's overall assets.