June closures in equity folios at 17-month low

India's mutual fund (MF) sector has put a brake on the sharp (month-on-month) fall in its equity investors' base. In June, the monthly decline in equity folios was only 113,000, a remarkable improvement. It is the lowest such erosion in 17 months.

June has also seen the highest net inflow in the equity segment since September 2011, thanks to low redemption requests.

As on June-end, the number of equity accounts (including equity-linked savings schemes) was 32.09 million, shows data from the Securities and Exchange Board of India (Sebi).

Sundeep Sikka, chief executive officer, Reliance MF, said: "It's a positive development and a result of efforts being put by the industry on investors' education while reaching out to those in smaller cities. I believe the kind of troubles faced in the past are slowly settling down and the direction of growth from here is only up."

Chief marketing executives in the sector termed it a "long-awaited relief". May saw closure of a massive 700,000 equity folios.

“We went through terrible times. Fresh statistics show that investors are staying invested and new customers have also entered. There is a general realisation among investors that stock markets’ valuation is bottoming out,” said the marketing head of a large fund house.

Sebi's chief, U K Sinha, also had raised concern over the continuous decline in folios in recent quarters, at the CII Summit on MFs last month.

 

What sets June apart is less of redemption requests. This helped equity fund managers to discontinue their heavy selling. For the month, the sector sold shares worth a mere Rs 100 crore, the lowest in 15 months and far less than in May, when it crossed Rs 3,500 crore.

However, says Ajit Menon, executive vice-president at DSP BlackRock MF, "It was a good month but sentiments continue to remain weak."

Relevant, as on several occasions in the past, positive developments in the sector turned out to be aberrations amid a negative outlook. Further, when seen from a half year's perspective, the sector has lost as much as 1.9 million equity folios during January-June. In the same period last year, these closures were 1.57 million .