Stock Funds in India Bleed Record Outflow as Benchmarks Rally On

Equity mutual funds in India were hit by their biggest-ever outflow in November, signaling that local investors are booking profits after a record-breaking rally this year.

Net withdrawals reached 129.2 billion rupees ($1.8 billion) last month, according to data from the Association of Mutual Funds in India. That marked the fifth straight month of outflows and an almost fivefold jump over October’s withdrawals of about 27 billion rupees.

The outflows have come as India’s benchmark S&P BSE Sensex hits successive records in the past few days as a coronavirus vaccine and the post-pandemic recovery drives a global rally. Foreign investors have fuelled the surge, piling a record $9.6 billion into Indian shares in November. The Sensex jumped more than 11% last month.

“Investors are booking profits in equities to take advantage of the huge increase in the index level,” said N S Venkatesh, chief executive officer at AMFI, “Some profit booking may continue if the index continues to go higher.”

Stock Funds in India Bleed Record Outflow as Benchmarks Rally On

Hybrid funds, which invest in stocks and bonds, saw an outflow of 52.5 billion rupees in November, the AMFI data showed.

Meanwhile, some fund managers are predicting India’s record-breaking equity rally to continue next year, with banks and other stocks taking over as drivers of index gains from the nation’s largest company Reliance Industries Ltd. Reliance has accounted for nearly a fifth of the 75% surge in the S&P BSE Sensex from its March bottom, according to data compiled by Bloomberg.

“The strong performance of equity markets in November seems to have encouraged more investors to book profits and move to short-term investments,” according to G. Pradeepkumar, chief executive officer at Union Asset Management Co. “There is a significant amount of money that can come back to the market in the event of any correction. The medium-to-long term potential remains strong.”

©2020 Bloomberg L.P.

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