Mutual fund buy-sale ratio rides below the long-term average in November reflecting caution among investors

The gross buy-to-sale ratio of equity mutual funds dropped to 1.09 in November 2022 compared with the long-term average of 1.59, the data from AMFI showed. The ratio, which reflects the investor conviction about the market momentum, contracted for the third month in a row implying a cautious approach amid high valuations and rising concerns over the near-term growth prospects. The ratio was below one for five out of the 11 equity schemes.

The gross sale of the equity mutual funds was at a 14-month high of Rs 26,029 crore in November 2022. The monthly average gross sale was Rs 16,774 crore over the past 12 months.

Large cap funds, one of the largest equity funds categories which is often regarded as defensive in uncertain times, reported a buy-sale ratio of 0.75 in November. It was the fourth consecutive month when its ratio was below 1.1. In the case of Flexi-cap funds, the ratio was at a 21-month low of 0.8. The two fund categories together account for nearly one-third of the assets under management (AUM) of the total equity funds worth Rs 15.5 lakh crore. On the other hand, the ratio for the midcap and small cap funds category was relatively higher at 1.5.

In addition, the momentum in folio additions on the equity side is tapering. The equity mutual funds added 6.1 lakh folios in November 2022 compared with the two-year average of 12.2 lakh. The folio count for large cap funds shrank by 26,000 in November. There were 13.8 crore accounts in the mutual fund industry in September of which 91.1% belonged to retail investors.

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