With markets at peak, mutual fund redemptions surge: Report

Investment in mutual funds continues to grow month over month, but a recent trend shows a significant rise in redemptions as investors book profits with markets at their peak, narrowing the gap between investments and redemptions. According to the Axis Mutual Funds monthly data report, total Assets Under Management (AUM) for mutual funds in July 2024 increased by 40 percent compared to the previous year, but redemptions surged by 61 percent during the same period.

The AUM in July 2024 increased to Rs 64,96,653 crore, from Rs 46,37,564 crore in July 2023, While redemptions in July 2023 was of Rs 18,28,851 crore, which surged by 60.68 percent to Rs 29,38,613 crore in July 2024. The experts cited that the surge in investments in mutual funds in the past year is due to the better returns provided by the industry. The surge is because of the high returns generated in the Indian stock markets in the last year.

However, the report also noted that while investments in mutual funds are increasing, redemptions are also surging due to the risk at the market being at an all-time high. The data showed that while investments in AUM mutual funds registered a growth of 40 percent, redemptions from the funds or equity outflows from the funds have surged by more than 60 percent.

The report data also indicated that in June 2024, the mutual fund industry showcased robust growth, particularly in the exchange-traded funds (ETFs) segment, which recorded gross sales of Rs 18,349 crore. This surge was complemented by the launch of six new schemes, which collectively mobilized Rs 179 crore, indicating a strong appetite for innovative investment options among investors.

"The mutual fund AUM for July 2024 increased by 6.23 percent over June 2024. The Equity funds saw outflows in July 2024, touching Rs 44,076 crore," said the report. As per the data, the sectoral and thematic categories emerged as significant contributors to the market, with net inflows reaching an impressive Rs 9,790 crore.

This trend reflects a growing interest among investors in targeted investment strategies that align with specific sectors or themes, capitalizing on market opportunities. Additionally, the cash AUM saw a modest increase of 1.95 percent since July 2023, indicating a stable liquidity position within the industry. The retail segment, in particular, has been a standout performer, growing at a compound annual growth rate (CAGR) of 31.55 percent