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November MF flows indicate lack of belief in rally, says White Oak Capital's Aashish Somaiyaa

Updated : December 09, 2020 09:31:33 IST

Investors are rushing to take money off the table as indicated by mutual fund outflows in November, said White Oak Capital Management's Aashish Somaiyaa on Wednesday. This indicates a lack of belief or sustenance in the market rally, he added.

In November, the redemptions in equity mutual funds rose to Rs 13,000 crore against about Rs 3,000 crore in October. At the same time, there was a sharp drop in systematic investment plan (SIP) contributions from Rs 7,800 crore in October to Rs 7,300 crore in November.

“This outflow shows that people who were shocked by what happened in March-April and they feel it’s enough of 2020 and people also want to take the money off the table because there is not much belief in terms of what is happening with the rally,” said the CEO of the firm in an interview to CNBC-TV18.

The recovery of capital tends to lead to outflows, Somaiyaa said.

“I have seen that wherever there is a recovery of capital that’s where the outflow is seen; wherever people are 10-15 percent below their invested value or where the returns are very subdued or negative, generally you don’t tend to see outflow there.”

Therefore, analysing both inflow and outflow data separately could indicate the mood on the street, he said.

“Therefore, we need to look at net flow numbers on both counts; inflow and outflow separately because that tells us a lot about what people are thinking.”

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