MF equity folio closures fall below 100,000

Sector witnesses lowest decline in equity accounts since December, 2011

India’s struggling equity segment of the mutual fund sector has seen the lowest monthly decline in its investors' base since December 2011. In August, the overall closure of equity folios (including those of equity-linked saving schemes) stood much below the 100,000-mark.

This comes as a breather for the industry which has been losing, on an average, close to 200,000 equity accounts on a monthly basis since 2009. Rather, it would not be wrong to say the 100,000-mark had almost become a monthly benchmark for several funds. But this time, fund houses managed to keep closures well below that level at 62,804.

It had earlier seen such folio erosion in December 2011, when equity schemes had lost 25,378 folios. Later, it intensified and there were months which saw 300,000-700,000 closures. In May, when the sector lost a record 700,000 accounts, chief marketing officers had termed the period as “terrible times”.

Compared to that, August has brought a sigh of relief to fund houses. With the latest low figures, MFs’ overall equity folios stand at 31.6 million. H N Sinor, chief executive of the Association of Mutual Funds in India, said: “We are seeing investors coming back to equities as confidence in the market is reviving. I believe it’s a trend reversal which should sustain.”

According to Sundeep Sikka, chief executive of Reliance Mutual Fund: “I have a feeling that things are now bottoming out. The last two-three years have seen enough redemptions. Ultimately, if the underlying asset starts doing good, investors tend to look at it and that's what is happening now.” Investors’ rising interest in equities was evident from the fact that August saw a fresh inflow of Rs 458 crore. The month had extremely volatile sessions with key indices taking a beating of nearly 10 per cent at one point of time. Later, they managed to pare the losses to a large extent and closed the month a little below four per cent. Such sharp moves did not let investors exit and also attracted opportunistic investors to invest at dips.

Currently, the sector offers 345 equity schemes (including ELSS) to investors. As on August 31, assets under management of equity segment stood at Rs 1.57 lakh crore, constituting 21 per cent of the sector’s overall AUM.

Monthly equity closures so far in FY14

Month	Decline (Month-on-month)
April	2,64,005
May	6,99,732
June	1,13,550
July	3,56,426
August	62,804
Source: Securities and Exchange Board of India (Sebi)