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MFs equity mop-up drop 12% in last five months as investors turn wary over valuations


Mutual fund equity schemes have seen a a 12 per cent decline in funds raised during the first five months of 2023, amounting to ₹1.57-lakh crore compared with the ₹1.78-lakh crore recorded in the same period last year. This decline can be attributed to investors’ worries over high market valuations and their apprehension of a significant market downturn.

Redemptions from equity schemes in the industry have jumped 23 per cent in last five months to ₹98,274 crore against ₹80,178 crore registered between January and May last year, according to data sourced from the Association of Mutual Funds of India (AMFI).

Funds mobilised (in Rs. crore) Redemptions (in Rs. crore) Funds mobilised (in Rs. crore) Redemptions (in Rs. crore)
Year 2023 2023 2022 2022
May 30,809 27,569 31,619 13,090
April 25,401 18,921 32,617 16,726
March 38,640 18,107 46,408 17,944
February 32,476 16,790 33,777 14,072
January 29,433 16,887 33,234 18,346
Total 1,56,759 98,274 1,77,655 80,178

Source: AMFI

Arun Kumar, Head of Research, FundsIndia, said domestic flows weaken whenever the market moves close to a record high as investors expect a sharp correction to follow. In the last four times, when the markets came close to their all-time highs it was followed by a 10-15 per cent correction and most investors tend to extrapolate this to delay their investments, he added.

In the last few weeks, equity markets have rallied by about eight per cent and are close to their previous all-time high levels as domestic and foreign institutional investors who usually take contradicting views have all turned bullish.

Light at end of the tunnel

Domestic institutions, including mutual funds and insurance companies, have jumped on the bandwagon of the bullish market trend alongside foreign portfolio investors, thanks to a steady influx of funds through systematic investment plans (SIPs). This surge in capital has propelled the markets to unprecedented levels.

SIP inflows in the last five months jumped 18 per cent to ₹70,295 crore against ₹59,432 crore recorded last year.

Also read: Maharashtra and Delhi account for bulk of MF investors

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said FPIs have pumped in ₹43,838 crore in May and topped it with investments of ₹16,405 crore till June 17. There is a near consensus among FPIs that India has the best earnings growth story among the large emerging economies and they are all geared to exploit this potential, he said.

Allaying concerns, Kumar said even if the equity market moves at the pace of expected corporate earnings growth of 12 per cent per annum, the indices should double in six years, quadruple in 12 years and grow 10-fold in next 20 years.

Between 2018 and 2020, Nifty hit all-time high of about 12,000-level three times and subsequently fell 15 per cent, 12 per cent and 38 per cent thereafter. However, from there it gained a whopping 50 per cent to a new high of 18,162 in September 2021, as per FundsIndia data.




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