Investors pull out Rs 903 crore from gold ETFs in FY16

Investors remained bearish on gold exchange-traded funds (ETFs) as they pulled out Rs 903 crore from this instrument last fiscal, making it the third consecutive financial year of outflow.

The pace of outflow, however, slowed down in the 2015-16 fiscal ended March 31, as against the preceding two years on account of a sluggish equity market.

According to the latest data available with Association of Mutual Funds in India (Amfi), gold ETFs witnessed a net outflow of Rs 903 crore last fiscal, compared to an outflow of Rs 1,475 crore in the preceding financial year. In 2013-14, the funds witnessed outflow of Rs 2,293 crore.

The asset base of gold funds dropped to Rs 6,346 crore in March 2016 from Rs 6,665 crore at the end of March 2015.

"Gold prices had a good run until 2012 and investors bought gold chasing the historical returns from gold. As gold corrected, investors were disappointed and thereby exited out of gold. Equities saw a good run up from September 2013 onwards and sentiment towards equities improved thereby driving flows/shift from other asset markets to equities," Quantum AMC Senior Fund Manager (Alternative Investments) Chirag Mehta said.

However, the pace of outflows has slowed down, as most of the return chasing disappointed investors seem to have exited from gold ETFs, he added.

The demand for gold ETFs has been steadily falling in the past few years. These products have seen outflow as gold prices are correcting and equities have given good returns to investors.

Retail investors have been putting in more money into equity and debt mutual funds in the last financial year.

Equity and equity-linked saving schemes saw an infusion of over Rs 74,000 crore and debt funds attracted nearly Rs 20,000 crore.

Overall, the mutual fund schemes have witnessed an inflow of Rs 1.34 lakh crore during the period under review.

"With the recovery in prices (positive short-term performance) the return chasing types may come back," he added.

The mutual fund sector has 14 gold-based schemes, which have been in the market since 2006-07.