As it happens ever so often, retail investors seem to have missed the equity bus yet again. Even as the benchmark indices climbed more than 25% this year, many investors, especially those who had entered during the peak of early 2008, used the opportunity to exit the market by redeeming their investments in equity mutual fund schemes.
Equity funds witnessed outflows of R12,702 crore till November this year, the second highest outflows in the category witnessed in the last six years. This, in a year when the benchmark BSE Sensex gained over 25% and the market saw overseas inflows of nearly $23 billion. The year 2010 had seen R15,849-crore outflows.
“Investors who have been waiting on the sidelines for several years hoping for the markets to move up used the rally to make good their losses or book small profits. That’s the reason for the uptick in redemptions we have seen this year,” said Dhruva Chatterji, senior research analyst, Morningstar India.
Adding the category of ELSS — which are tax-saving schemes that invest in equities — outflows this year touch R13,902 crore against R15,508 crore in 2010.
So, theoretically, if the numbers for December are accounted for, equity outflows in 2012 could yet surpass those seen in 2010.
Those who invested during the peak of early 2008 suffered when the market tanked in the aftermath of the global financial crisis. Many of them, who were not willing to book heavy losses, have been waiting patiently for their investments to break even. At 19,200-levels, the market is still some distance away from that peak, but the rally has done enough to make investors press the exit button. “Investors are now relieved that they can exit with their capital intact,” said Naval Bir Kumar, vice chairman, IDFC MF.
The volatility in the market and the absence of a clear directional trend also dented retail investors’ confidence. For instance, while the year began well with the Sensex touching a high of 18,428 points on February 22, it fell to the year’s low of 15,948 points on May 23, before regaining steam in September and touching a 19-month high in December. “Investors seem to have run out of patience. The industry has concentrated on increasing the number of SIPs this year but it has not been able to arrest the quantum of outflows in equity schemes,” said Sarath Sarma, executive director, IDBI Asset Management.