MF investors rush to book profits in July

By Ravi Samalad |  10-08-20 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

With markets bouncing back, mutual fund investors are rushing to book profits. The Sensex has recovered 29% since its March low. In July 2020, gross redemptions from equity funds were Rs 16,622 crore while net inflows stood at Rs 14,141 crore which resulted in a net outflow of Rs -2,480 crore.

Combined net outflows from equity and hybrid schemes were Rs -9,781 crore in July 2020. Net outflows from hybrid funds stood at Rs -7,301 crore. A majority of these outflows were from arbitrage (Rs-3,732 crore) and balanced funds (R -2,196 crore).

The SIP inflows dipped marginally to Rs 7,831 crore in July 2020 as compared to Rs 7,917 crore in June 2020.

"This is partly because of profit booking after a strong rally since the end of March 2020. It appears that a good chunk of this money has moved to short term debt funds. These investors could be waiting for a correction to re-enter the market. Monthly SIP contribution has dropped further but it is important to note that the number of SIP folios has increased by around 4 lakh underscoring the fact that investment in mutual funds through the SIP route continues to be a preferred choice among retail investors," said G Pradeepkumar, CEO, Union Mutual Fund.

Debt Funds

Debt funds received net inflows of Rs 91,391 crore across categories. Banking & PSU Funds and Corporate Bond Funds are getting popular among investors. The AUM of Banking and PSU funds crossed Rs 1 lakh crore mark in July 2020. This category received net inflows of Rs 6,323 crore in July 2020. Corporate Bond Fund also received healthy net inflows of Rs 11,910 crore. Gilt Funds received Rs 3,395 crore.

Morningstar Investment Management’s take on corporate bond segment

Based on our valuation-implied return forecasts, the corporate bond segment (3-5 years) looks relatively attractive over the short-term debt (G-sec) segment. The attractiveness of the credit segment relative to the banking & PSU debt segment has also improved with money flowing towards the latter – a recent drop in yields and spread compression in the banking & PSU segment reduces the return expectations. The case for investing in this segment has improved. Of course, risks remain elevated; however, we believe the yields on offer are compelling for long-term investors.

Exchange Traded Funds (ETF)

Exchange Traded Funds received net inflows of Rs 14,265 crore in July 2020. A major portion of the inflows came in BHARAT Bond ETF - April 2025 and BHARAT Bond ETF - April 2031 which mopped up Rs 11,024 crore.

Gold ETFs received Rs 921 crore in July 2020.  The global rush towards safe haven has pushed gold prices to Rs 59,300 per 10 grams. As a result, the assets under management of Gold ETF category increased to Rs 11,462 crore, up 10% from Rs 10,375 crore in June 2020.

The AUM of ETF category increased from Rs 1.95 lakh crore in June 2020 to Rs 2.16 lakh crore in July 2020.

The AUM of the industry reached Rs 27.28 lakh crore in July 2020 from Rs 26.06 lakh crore in June 2020.

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