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.
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