InvestorQ : How much did domestic mutual funds sell overall in equity markets during FY21?
Moii Chavate made post

How much did domestic mutual funds sell overall in equity markets during FY21?

Tisha Malhotra answered.
1 year ago

Domestic mutual funds sold a massive Rs.129,000 crore worth of equities in FY21, which is the highest level of selling in the last 10 years. Surprisingly, this happened in a year when the markets were actually up 70% yoy. This was largely on account of heavy redemptions from equity mutual funds as there was a big shift to direct investments in equity. This is a shift as mutual funds have been net buyers in equities in most years.

Some of the experts have observed that there is a tendency among retail investors to sit on losses in the hope of a bounce but hurry to trim gains. FY21 was a rare year because those MF investors who were lucky to have stayed invested in March 2020 made a fortune in the next few months. Also, there was a good bit of selling by retail investors to make up for the liquidity gaps caused by the pandemic.

The last time mutual funds sold shares aggressively in a year was in 2014 but even then the selling was just to the tune of Rs.22,000 crore. Over the last 6 consecutive years, the mutual funds have been net buyers in equities. In fact, over the last 6 fiscal years, mutual funds bought equities worth Rs.79,431 crore. In short, the year 2021 has completely negated the MF buying over the previous six years.

The reasons are not far to seek. Equity mutual funds registered 8 consecutive months of outflows since June 2020, according to AMFI data. In addition, MFs were also trimming their positions in blue-chip companies such as Bharti Airtel, HDFC Bank, Reliance Industries and HDFC. This could be a mix of profit booking and forced trimming as funds reach the 10% mark on frontline stocks.