Mutual fund flows in Aug-20 update!

Mutual fund flows in Aug-20 update!

Last updated: 10 Sep, 2020 | 02:06 pm

Mutual fund flows in Aug-20 update!

Equity mutual funds flows

  • Equity mutual funds witnessed record-high net outflows of ₹4,000 crore in August, according to data released by Amfi. Last month equity mutual funds witnessed net outflows of ₹2,480 crore, highest outflows in over four years. Equity mutual funds saw a total inflow of Rs 14,558.20 crore and outflow of Rs 18,557.82 crore.
  • “Selling was seen across categories in equity mutual funds, with large cap funds seeing the highest outflow of ₹1.554 crore in Aug-20. Thematic funds, ELSS and Focused funds were the only categories with net inflows.”
  • Inflows into the equity have suffered as investors deal with the economic impact of Covid-19, and also investors booking profits to allocate the money to different asset classes, say debt, as the likes of corporate bond funds have seen inflows.

Debt mutual fund flows

  • Among debt mutual funds, liquid funds category was the worst hit, across all categories. Liquid funds which are used by corporates to park surplus cash registered outflows of Rs 15,814 crore in August.
  • As seen from the table below, Overnight Funds too recorded an outflow of ₹10,298 crore. Ultra short, Low Duration, Money Market and Short Duration Funds saw inflows for the fourth straight month. 
  • “Gilt Funds, which had seen consistent inflows in this fiscal, saw outflows in the month of August-20. The 10-year G-Sec yield moved up sharply from 5.8% to  6.2%, causing returns of gilt funds to drop sharply, and could likely have contributed to the selling witnessed in the gilt categories.”

INDmoney Analysis

  • With this, August-20 is now the third month witnessing overall net outflows in mutual funds for the calendar 2020, apart from February and March
  • A majority of the outflows in equity mutual funds can be attributed to profit booking after the headline indices went up by almost 3% in Aug-20. The markets have clearly run ahead of the fundamentals.
  • Our proprietary VGQM model continues to have a ‘Neutral’ rating on Nifty 50. Invest in equities in a staggered manner. Keep your SIP’s running. Stick to large caps and index stocks that are best suited to navigate the economic crisis
  • Stick to AAA-rated low duration funds and bonds over high duration funds, and long-maturity bonds as yields will remain volatile in the near future