InvestorQ : Why have Indian mutual funds continued to sell in the equity markets? Is it because of redemption pressures?
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Why have Indian mutual funds continued to sell in the equity markets? Is it because of redemption pressures?

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vidhya Laxmi answered.
3 months ago
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The surge in mutual fund outflows from the equity markets can be largely attributed to the redemption pressures that these mutual funds are facing. While SIPs continue, the lump-sum investments are literally ditching the markets and have turned into heavy selling.

On the one hand, the stock markets are celebrating the return of FPI flows in Nov-20, but on the other hand the domestic mutual funds continued to sell. In a month when FPIs infused more than Rs.65,000 crore into Indian equities, Indian mutual funds actually withdrew Rs.30,760 crore from the equity markets. What explains this phenomenon?

Redemption pressures built up in equity funds at higher levels and as a result the financial pressures created by COVID triggered a spate of selling in mutual funds. This has been responsible for the consistent selling by mutual funds in equity markets.

Most retail MF investors have been cautious about the equity markets which are trading at around 36 P/E and that forced MFs to sell out of Indian equities. Since the beginning of June 2020, Mutual Funds withdrew Rs.68,400 crore from stocks and that largely offsets the infusion by foreign investors.

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