Volatile interest rates over the past year with a rising trend resulted in money flowing out of mutual funds income and liquid schemes in 2010-11. According to the data provided by the Association of Mutual Funds in India (Amfi), income and liquid schemes saw redemptions of over R40,000 crore while equity schemes witnessed outflows of approximately R13,400 crore. Meanwhile, after a gap of three months equity schemes once again witnessed redemptions in March with investors profit booking after the rise in equity markets. The Sensex rose 9.1% while NSE gained 9.38%.
Birla Sunlife AMC CEO A Balasubramanian said, "The reasons for income schemes seeing withdrawals was the rising interest rate scenario." Sundaram MF head fixed income Dwijendra Srivastava said, "From the very beginning of 2010-11 there were problems like tight liquidity conditions, followed by the 3G and BWA auctions during which the banks and corporates pulled out money from income schemes."
In June last year, debt funds saw redemptions of over R1.17 lakh crore while the highest outflows took place in March 2011 when R1.28 lakh crore moved out with companies paying advance taxes.
In July Sebi asked fund houses to mark to market debt and money market securities with a maturity up to 91 days whereas earlier this practice has been applicable to securities with a tenure of 182 days. That caused some amount of volatility in NAVs which some investors were averse to. Birla's Balasubramanian points out, "The new regulation did not have much of an impact on liquid schemes and they delivered a strong return of 8% during 2010-11."
Canara Robeco MF head investments Ritesh Jain said, "In the last few months banks have upped FD rates making it attractive for savers. As such, lot of liquid money moved into FDs which could be one of the reasons for the redemptions."
Last year was a difficult one for equity schemes with only four months seeing inflows and the month of September witnessing record outflow sof R7,000 crore.
"Investors are investing in equity schemes through systematic investment plans (SIPs). But still there is lack of participation from the distributors due to lack of commission and as markets are going up we are witnessing outflows," said a senior official form the leading fund house.
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