Equity Mutual Funds Giving Out Dividends On Sharp Market Rally

As the equity market gained by more than 10% between July and August after cracking substantially in the late-March mayhem, equity mutual funds across categories such as large cap, multi-cap to ELSS schemes are currently busy paying out dividends to their investors from the profits made.

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The schemes that have either paid out the dividend in the last one month or are in the process of releasing the same have witnessed a sharp traction in their NAVs over the last few months. While for most schemes the gains have been over 20 percent on their net asset value (NAV), for some it has even gone up to 30-43 per cent during the timeframe.

On the move, Kaustubh Belapurkar, director, fund research, Morningstar Investment Adviser India is quoted in an online money portal as saying "Markets had rallied sharply.So, asset management companies have distributable surplus to pay dividends".

Also, fund managers owing to high uncertainty with regard to sustainability as well as pace of the stock market boom amid the Covid 19 pandemic were lured to book profits and pay-out distributable surplus to investors as dividends. Another case is that since regular dividend pay-out is also a performance metric on the basis of which fund managers are evaluated, mutual fund companies tend to distribute surplus whenever there is availability of the same.

As many as 20 mutual fund schemes have been reported to declare dividend in the last one month.

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