Equity mutual funds in India faces the first monthly withdrawal

The pandemic is affecting investors in equity mutual funds in a big way. Monthly withdrawals of money from these funds have not happened for four years. This is possibly due to the immediate requirement of cash. Another major reason is due to the increasing risks in the stock market. This has spread fear amongst the investors who are now opting out. In the month of July, the net withdrawal might reach upto a whopping ₹10 billion. This is the highest net withdrawal since March 2016 from stock markets.

What will happen next?

While most of the investors are using this to manage monetary crises, loss in business, and the absence of finance in banks, some investors are trying to make a profit once the stock market is stable. The markets have also risen this month urging investors to increase redemption. The redemption in equity mutual funds for the month of June has doubled.

On the other hand, the overseas flow and participation of amateur investors have given a rise in the Sensex. It has grown up to 9% in the month of June. However, this has not encouraged the mutual funds investors largely. This is because investors need money to get going in these times of uncertainties. This gets us thinking about the reduction of fund flow in the stock markets.

During these risky times, if this net outflow is achieved then we may not expect investment as a way to rely upon. This month was managed by overseas flows and local markets. In case there is next time, then these funds will also be unavailable.

As of now, this is going well. Moreover, all investors are trying to book profits. Trying new methods to invest and build money cannot be a viable option for anybody.