Invest In India

The mutual fund industry seems to be facing some redemption pressure now, which could be the reason why they have been net sellers of equity so far this month. According to the data available on the Web site of the Securities and Exchange Board of India, they have been net sellers to the tune of Rs 732.9 crore. They were net sellers of equity in August as well; in October they were net sellers of debt too for Rs 713.5 crore.
“They are bound to face redemption pressure”, said Juzer Gabajiwala, Head, Mutual Fund Distribution, Ventura Securities.

“What is happening now is that corporate houses have been taking their corpuses out, especially from liquid funds such as Fixed Maturity Plans.”

The fund houses have increased their cash surplus to about 15 to 20 per cent of their assets under management so that they can meet demand for redemption if necessary, said Mr R. Swaminathan, Vice-President and National Head of Mutual Funds, IDBI Capital.

Retail reaction
Retail investors have not pushed the panic button on mutual funds, said analysts.
“They have been selling equities and holding on to their investments in mutual funds as they know that in the long run they will be able to make some money”, said P. R. Dilip, Managing Director, Impetus Wealth Management Ltd.

Fund managers say fund houses should now concentrate on educating people to stay invested in funds for the long run. Though many fund houses do have new schemes and products in the pipeline. They seem to waiting for a better time to offer it to the investors, said Swaminathan.