The\nnationwide lockdown imposed as a consequence of the coronavirus crisis led to\nmany people losing their primary revenue stream. Lay-offs, job losses, and\nsuspension of business operations were rife. Also, the recent brutal market\nsell-off in the month of March 2020 perhaps spooked the investors and caused\nwidespread panic. <\/p>\n\n\n\n
As\na result, many investors, both retail and institutional, completely lost their\nrisk appetite. This led to the investors pulling their money out from mutual\nfunds. Some investors, upon redeeming their mutual fund investments, reinvested\nit in direct equity in the hopes of witnessing better overall gains. <\/p>\n\n\n\n
Switch to fixed-income securities and safe-haven assets<\/strong><\/h2>\n\n\n\nThe\ndrop in the risk appetite of investors directly led to them investing in\nsafe-haven assets and fixed-income securities such as debt funds and gold\nexchange-traded funds (ETFs). In fact, the monthly net inflow into debt-funds\nwas around Rs. 91,391 crores as on the month of July, 2020. The high levels of\nnet inflow into these funds clearly indicate the investors\u2019 change in\npriorities. <\/p>\n\n\n\n
Due\nto the increased volatility in the equity market, investors are now clamoring\ntowards secure, better managed, and fixed interest earning investment options.\nIn addition to debt funds, the net inflow into gold exchange-traded funds also\nwitnessed a jump of around 53% month over month. As a matter of fact, the\ninflows spiked to around Rs. 921 crores in the month of July, up from around\nRs. 494 crores in June. This is another clear-cut indication of investors\nadopting a safety-first approach to their investment capital. <\/p>\n\n\n\n
Additional Read: \u00a0<\/strong>Understanding Mutual Fund Terminologies<\/a><\/p>\n\n\n\n![\"Reasons](\"\/wp-content\/uploads\/2020\/09\/equity-mfs-see-the-first-monthly-outflow-2-min.jpg\")
<\/figure>\n\n\n\nProfit booking<\/strong><\/h2>\n\n\n\nA\nmajor reason for investors redeeming their mutual fund investments has to do\nwith profit booking. After the sudden and extreme market sell-off in March,\n2020, the markets witnessed a faster than expected recovery. This led to\ninvestors exiting equity\nmutual funds to cash out the profits earned by them. <\/p>\n\n\n\n
The\nentire profit booking exercise could have been a major contributor to the high\nlevels of net mutual fund\noutflow for the month of July, 2020. And, when you compare and contrast\nthe decline in equity\nmutual fund inflows with that of the debt-fund inflow, it becomes quite\nclear that the investors booked profits and deposited their investment capital\nin secure fixed-income assets. <\/p>\n\n\n\n
Fear of market correction<\/strong><\/h2>\n\n\n\nInvestors\nexpecting another sharp market correction is another probable reason why the\nmonth of July 2020 witnessed a decline in equity mutual funds. The sudden market sell-off has\nshaken up the investors and has pushed them towards capital conservation. As a\nresult of this, many investors are seemingly exiting the mutual fund market due\nto the fear of having to face another deep market correction. <\/p>\n\n\n\n
To\nbe fair, the anxiety of investors is not totally unfounded. The current stock\nmarket recovery has been no less than miraculous due to the widespread increase\nin the stock prices despite the economy fighting a crisis. And so, it\u2019s only a\nmatter of time before the bubble bursts. Therefore, investors exiting equity\nmutual funds early before the next sell-off seems justified. <\/p>\n\n\n\n
Additional Read:<\/strong> Investing in different asset classes based on their risk<\/a><\/p>\n\n\n\nConclusion<\/strong><\/h2>\n\n\n\nIn addition to these, another compelling reason for the decline in equity mutual fund inflows could be chalked up to the decreasing cash reserves of investors. Since most of them have been rendered either jobless or with little to no income, they\u2019ve relied on redeeming their mutual fund investments to meet their financial obligations. That said, with the recovery of the job market and the economy as a whole, the equity mutual fund inflows can also be expected to get back on track and return to how things were before the crisis came knocking. <\/p>\n\n\n\n
Managing your finances during these uncertain times can be difficult, particularly if you\u2019re a beginner. If you\u2019re having trouble making good investment decisions, or if you\u2019re in need of professional assistance, Tata Capital\u2019s wealth management solutions<\/a> may be just what you need. With our team of expert wealth managers, you can ensure that your investment portfolio is ideally constituted for all the ups and downs in the market. <\/p>\n","protected":false},"excerpt":{"rendered":"In the beginning of August, the Association of Mutual Funds in India (AMFI) released its monthly report for the month of July, 2020 containing the net mutual fund outflow. <\/p>\n
<\/figure>\n\n\n\nProfit booking<\/strong><\/h2>\n\n\n\nA\nmajor reason for investors redeeming their mutual fund investments has to do\nwith profit booking. After the sudden and extreme market sell-off in March,\n2020, the markets witnessed a faster than expected recovery. This led to\ninvestors exiting equity\nmutual funds to cash out the profits earned by them. <\/p>\n\n\n\n
The\nentire profit booking exercise could have been a major contributor to the high\nlevels of net mutual fund\noutflow for the month of July, 2020. And, when you compare and contrast\nthe decline in equity\nmutual fund inflows with that of the debt-fund inflow, it becomes quite\nclear that the investors booked profits and deposited their investment capital\nin secure fixed-income assets. <\/p>\n\n\n\n
Fear of market correction<\/strong><\/h2>\n\n\n\nInvestors\nexpecting another sharp market correction is another probable reason why the\nmonth of July 2020 witnessed a decline in equity mutual funds. The sudden market sell-off has\nshaken up the investors and has pushed them towards capital conservation. As a\nresult of this, many investors are seemingly exiting the mutual fund market due\nto the fear of having to face another deep market correction. <\/p>\n\n\n\n
To\nbe fair, the anxiety of investors is not totally unfounded. The current stock\nmarket recovery has been no less than miraculous due to the widespread increase\nin the stock prices despite the economy fighting a crisis. And so, it\u2019s only a\nmatter of time before the bubble bursts. Therefore, investors exiting equity\nmutual funds early before the next sell-off seems justified. <\/p>\n\n\n\n
Additional Read:<\/strong> Investing in different asset classes based on their risk<\/a><\/p>\n\n\n\nConclusion<\/strong><\/h2>\n\n\n\nIn addition to these, another compelling reason for the decline in equity mutual fund inflows could be chalked up to the decreasing cash reserves of investors. Since most of them have been rendered either jobless or with little to no income, they\u2019ve relied on redeeming their mutual fund investments to meet their financial obligations. That said, with the recovery of the job market and the economy as a whole, the equity mutual fund inflows can also be expected to get back on track and return to how things were before the crisis came knocking. <\/p>\n\n\n\n
Managing your finances during these uncertain times can be difficult, particularly if you\u2019re a beginner. If you\u2019re having trouble making good investment decisions, or if you\u2019re in need of professional assistance, Tata Capital\u2019s wealth management solutions<\/a> may be just what you need. With our team of expert wealth managers, you can ensure that your investment portfolio is ideally constituted for all the ups and downs in the market. <\/p>\n","protected":false},"excerpt":{"rendered":"In the beginning of August, the Association of Mutual Funds in India (AMFI) released its monthly report for the month of July, 2020 containing the net mutual fund outflow. <\/p>\n
Investors\nexpecting another sharp market correction is another probable reason why the\nmonth of July 2020 witnessed a decline in equity mutual funds. The sudden market sell-off has\nshaken up the investors and has pushed them towards capital conservation. As a\nresult of this, many investors are seemingly exiting the mutual fund market due\nto the fear of having to face another deep market correction. <\/p>\n\n\n\n
To\nbe fair, the anxiety of investors is not totally unfounded. The current stock\nmarket recovery has been no less than miraculous due to the widespread increase\nin the stock prices despite the economy fighting a crisis. And so, it\u2019s only a\nmatter of time before the bubble bursts. Therefore, investors exiting equity\nmutual funds early before the next sell-off seems justified. <\/p>\n\n\n\n
Additional Read:<\/strong> Investing in different asset classes based on their risk<\/a><\/p>\n\n\n\n In addition to these, another compelling reason for the decline in equity mutual fund inflows could be chalked up to the decreasing cash reserves of investors. Since most of them have been rendered either jobless or with little to no income, they\u2019ve relied on redeeming their mutual fund investments to meet their financial obligations. That said, with the recovery of the job market and the economy as a whole, the equity mutual fund inflows can also be expected to get back on track and return to how things were before the crisis came knocking. <\/p>\n\n\n\n Managing your finances during these uncertain times can be difficult, particularly if you\u2019re a beginner. If you\u2019re having trouble making good investment decisions, or if you\u2019re in need of professional assistance, Tata Capital\u2019s wealth management solutions<\/a> may be just what you need. With our team of expert wealth managers, you can ensure that your investment portfolio is ideally constituted for all the ups and downs in the market. <\/p>\n","protected":false},"excerpt":{"rendered":" In the beginning of August, the Association of Mutual Funds in India (AMFI) released its monthly report for the month of July, 2020 containing the net mutual fund outflow. <\/p>\nConclusion<\/strong><\/h2>\n\n\n\n