Equity MF redemptions jump nearly 40% despite strong SIP inflows
Investors cash in on market recovery and rotate funds into mid- and small-cap schemes despite elevated valuations
Systematic investment plan (SIP) inflows into mutual funds have risen, but equity scheme redemptions have surged by more than 38 percent year-on-year in July, according to data from the Association of Mutual Funds in India (AMFI). The trend has been increasing since April, coinciding with a strong market recovery as benchmark indices rebounded.
Investors are taking advantage of market gains and cashing in on profits, redeploying funds into riskier segments such as mid-cap and small-cap funds. Valuation data suggests a growing appetite for these segments, with small-cap stocks trading at a premium to the Nifty 50's price-to-earnings (P/E) ratio and mid-cap stocks trading at elevated valuations.
While some investors are harvesting gains at the top of the market-cap curve, others are redeploying funds into lower-cap segments. Experts attribute the rise in redemptions to profit booking and fund rotation rather than exits from equities.
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