Retail investors seem to have dipped into their mutual fund savings to meet pre-festival spending. Investors pulled out ₹6,578 crore from their systematic investment plan (SIP) accounts in September, the highest in the last 11 months, a report by Business Standard stated.
Meanwhile, the redemptions were on the higher side during the previous festive season as well, noted the report. In September 2021, investors redeemed more than ₹8,600 crore, the highest since the start of the previous financial year (FY21), informed BS.
According to top MF distributors, redemptions go up before festivals as investors look to spend during these months for two reasons — the auspicious timing and better discounts.
"The redemptions did go up a notch last month with home loan down payments being the most common reason. As festivals approach, builders announce new schemes and lenders sweeten loan offerings. Investors wanting to buy a house, dip into their savings for down payments," said Pune-based MF distributor Dhananjay Kale.
Jimmy Patel, MD & CEO of Quantum Mutual Fund said that market movement could also be a factor. "Festivals were one reason. Secondly, the poor performance of equities could have resulted in asset reallocation. There's also a chance that investors would have utilized the rally in the first two weeks of September to exit equity funds with some gains," he said.
In September, close to ₹13,000 crore flowed into mutual funds through SIPs. However, the net inflow was only ₹6,400 crore, the report pointed out.
It is important to note that both gross and net SIP inflows have been rising in the last two years with gross SIP inflows remaining above ₹10,000 crore since September 2021.
The rising SIP inflows, despite poor performances of both equity and debt funds in the past year, are being seen as a good sign for the industry, which has worked to establish mutual funds as a long-term investment option and has been asking investors to not get concerned by market volatility, said the report.