Markets at all-time highs but equity Mutual Funds see rising outflows

Mutual Funds are considered as one of the best option for investment. Considering its benefits of returns and tax saving option has made it the most favourable. However, it does involves risk.

Equity mutual funds are witnessing strong outflows lately, despite Indian markets touching all-time highs. As per the data by Association of Mutual Funds in India, the outflows in equity mutual funds have been rising from past four months. 

In December last year, the outflows were Rs 7,932 crore, which jumped to Rs 12,355 crore in the month of January, 2017. In February the outflows were Rs 13,963 crore and in March, it was Rs 20,658 crore, which is nearly three times than that was in December, 2016.

One of the reason of the outflow could be the performance of the markets. The domestic markets have been touching all time highs and hence, it has pushed the investors to sell the schemes. 

Speaking with Zeebiz, Vidya Bala - Head of Mutual Fund Research - FundsIndia, said, "There is no sudden outflows in equity funds. Over 2016-17, while inflows into equity funds (including ELSS category) grew 39% over the previous year, the outflows jumped 63% over the same period. It has happened over the year and not suddenly. Retail investors (who are the primary investors in equity funds) tend to react both when markets are volatile or when they run up.

"Both these phases were seen in 2016-17 and the outflow could have been triggered in the early part of the year by volatility and the later part by market rally and profit booking.  With a large number of new investors in the system, who may not have a long-term approach, there may be a deterioration in the quality of net flows in the system”.

If we talk about the performance in this week, equity mutual funds were the worst performers. Sectoral-wise, equity-pharma and equity international funds gave negative returns this week, by falling 6% and 3.4% respectively.

Under equity-pharma, there are funds which gave nearly 3% of negative return in just one week. The week's average return for Pharma was -1.89% and for international funds were -0.21%.

If you look at the table above, Tata India Pharma DP (G) with net asset value (NAV) of 9.19 gave negative return of 2.63% and close to it was Tata IndiaPharma (G) with 8.98 NAV dropped 2.62%. Third was SBI Pharma DP (G) with NAV of 135.02, declined by 1.96% and in line with is was SBI Pharma (G) with 128.99 NAV dropping 1.98% in one week.

Moving ahead, Reliance Pharma (G) with 128.97 NAV plunged 1.57% and Reliance Pharma DP (G) with 133.50 NAV dropped by 1.56% during the week. Moreover, UTI GSF-Pharma&HC (G) with 85.66 NAV declining by 1.43% in a week and UTI GSF-Pharma&HCDP (G) with 88.86 NAV dropped by 1.41%.

Like Equity-Pharma, International Funds too declined by 3% in one week. BirlaSL CEF - GAP (G) with NAV of 20.72% plunged 2.93% and BirlaSL CEF - GAP DP (G) with NAV of 21.11 dropped by 2.92% in one week.

So, to get better returns in mutual funds, look at the long-term investment!