At 3.2k cr, Equity MFs Saw Out­flows in March af­ter 23 Months

The Economic Times - - Money -

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

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