At 3.2k cr, Equity MFs Saw Outflows in March after 23 Months
Mumbai: Equity mutual funds saw outflows of ₹ 3,206 crore in March, the first outflow in the last 23 months, as per data from AMFI (Association of Mutual Funds in India). The last time the mutual fund industry saw outflows was in April 2014 when the category saw redemption of ₹ 160 crore. Industry officials said the reason for the steep outflows from the category is redemption from arbitrage funds and from schemes where money was parked for dividend stripping.
“Investors redeemed from arbitrage funds and from select equity schemes which were used for dividend stripping,” said the CEO of a large domestic fund house. With the stock markets down in January and February, arbitrage opportunities reduced , wh ich brought down returns from these funds down to about 6 % from 8 %. Industry officials believe about ₹ 3,000 crore may have moved out from arbitrage funds. With March being the last month of the financial year, investors who had parked funds to strip dividend also withdrew to get tax benefits.
Dividend stripping is a practicewhereinvestorsuse dividends declared by a scheme to lower one’s tax liability. Investors earn the dividend and then show reductioninthenetassetvalue as capital loss to be adjusted against capital gains from any other investment. Investors can claim the notionallosscausedbythedividend payment if the units are bought three months before the record date or are held for at least nine months after the dividend is paid.
Despite this outflow, total equity assets of the industry grew by ₹ 26,474 crore in March to ₹ 3.45 lakh crore thanks to the stock market rally. Equity mutual funds have seen an inflow of ₹ 67,611 crore between April 2015 and March 2016.
Officials believe about 3,000 cr may have moved out from arbitrage funds