SIP rise helps MFs brake pace of equity folio loss

The domestic fund industry has been able to apply brakes on the pace with which it was losing its equity folios.

So far, in the second half of the current financial year, fund houses have lost a little over 200,000 folios. This is less than what the industry had lost in every single month during the first half.

The industry had witnessed a loss of close to 1.7 million folios in the equity segment during April-September, close to 300,000 every month. According to the Securities and Exchange Board of India, as on February 2011, industry’s equity folios were 39.2 million, against 39.4 million at the end of the first half of 2010-11.

“A large number of systematic investment plans (SIPs) brought this reversal. However, it is too early to say if it is an evolving trend,” says H N Sinor, chief executive officer of the Association of Mutual Funds in India. On an average, there is a monthly addition of 100,000 SIPs every month, adds Srinivas Jain, chief marketing officer of SBI MF. Agrees Karan Datta, national sales head at Axis MF: “Redemption levels have come down a bit, besides higher SIP growth.” Though it’s an encouraging trend for the industry, which has been hit hard and especially on the equity side of the business, market observers can’t say if it would be a sustained trend. For the year so far, equity schemes are still facing a net outflow of Rs 13,281 crore against a net inflow of Rs 2,611 crore during the previous year’s corresponding period.

Except the first month of the second half, inflows in the equity segment has seen a consistent improvement. In fact, February was marked by a record net inflow in equity schemes since the entry load ban came into effect in August, 2009. More, last month was the third in a row that industry saw money flowing into equity schemes. The sales of equity-related schemes in February, including equity-linked saving schemes, were marginally up at Rs 6,038 crore against Rs 5,969 crore in September.

However, compared with the same month last year, sales of equity-related schemes are up 10 per cent against Rs 5,486 crore in February 2010.

Currently, the industry has a little over 40 competitors, with equity asset under management of around Rs 1.9 lakh crore. The number of overall folios in the categories, including income funds, equity and exchange-traded funds, is 4.71 crore.