Arbitrage funds witness outflows in June

When equity and balanced mutual funds are continuing to observe robust inflows in month of June, the Arbitrage funds are witnessing a redemption situation. Arbitrage funds, take advantage of price difference between cash and futures market.

Arbitrage funds redemption stands at Rs 3500 crore. Meanwhile, balanced funds acknowledged high inflows of Rs 2402 crore, the highest since the start of the year. Most of the first time investors prefer these funds over pure equity funds due to the lower risk they carry as compared to pure equity funds. 

According to industry, investors have invested Rs 3600 crore into equity mutual funds. However, gold ETFs have witnessed an outflow of Rs 80 crore during the month with a total outflow of Rs 228 crore during Q1FY17.

The market regulator, Securities and Exchange Board of India (SEBI) has introduced new redemption rules. Now, mutual fund houses cannot restrict redemptions unless there is a crisis that can affect the industry at large. Even in such cases, investors will be able to withdraw up to Rs 2 lakh.

Investors continue to prefer sovereign gold bonds, over gold ETFs as these bonds give them an additional interest of 2.75% and are now listed on the stock exchange.