Indian stock markets hit new highs in March this year but mutual funds saw very high redemption during the month. In March, mutual funds saw outflows of Rs. 2,102 crore, a 12-month high, according to industry body Amfi’s figures.
The high outflows when markets are rising could partly be explained by profit-taking from investors. Sunil Subramaniam, Deputy CEO of Sundaram Mutual Fund, says the recent run-up helped a lot of investors get back into the black depending on when they made investment. In 2007 and 2008, stock markets were at very high levels, he added.
Mr. Subramaniam however said the March selling should not be seen as a return to redemptions and attributed the outflows to technical factors. “A lot of investors in equity mutual fund opt for dividend option schemes. For Sundaram, 40 per cent of investors have opted for the dividend option and over the last two months 30 per cent of our investors have received dividend,” he added.
Despite the run-up in Indian stock markets, Mr. Subramaniam says it is a good time to invest in stock market with a two to three year outlook, especially if you look at sectors like cyclicals and exports.
From a valuation point of view, cyclicals are at a 10-year low and banking is one of the sectors we are bullish on, he said.
Mr. Subramaniam says despite the recent rally the valuation of market remain reasonable. “The Sensex is trading at a forward PE of 15 and with EPS growth of 15 per cent; it could touch 30,000 in next few years even at the current multiple. And if this multiple expands, the Sensex could go even higher,” he says.