Despite last few strong trading sessions in the Indian stock markets,country's mutual fund industry is likely to see yet another month of higher redemptions from its equity segment.
The last three months - August to October - have been giving shocks to the fund houses as close to one-and-half-million equity folios were closed. According to industry's executives the current month may not be an exception as requests for redemptions continue unabated and money going out is exceeding what's coming in.
Avinash Ramnath, head of marketing at Canara Robeco Asset Management Company (AMC), says, "Trend of redemptions is still continuing. At every highs investors are booking profits or making sure their principle remains intact. At a time when other investment avenues are offering 8-10 per cent risk free returns why would investors invest in equities?"
True. At a time when returns from fixed deposits, corporates' NCDs and for that matter gold and real estate are fairly high; poor markets condition with global uncertainties once again raising their ugly heads have played havoc with retail investors' sentiments.
Agrees Akshay Gupta, chief executive officer at Peerless Mutual Fund. According to him rally in the markets have not been secular and sustainable. "That's why investors are losing faith in equities.Industry is likely to witness same situation in November as has been the case over the last few months," he adds.
Fresh inflows continue to be less than fund out go. "Gross sales in equity is poor," says Karan Datta, national sales head at Axis Mutual Fund. It's unfortunate that investors are not coming to equity markets despite the fact that in year-to-date terms equity as an asset class has given the highest returns, Datta adds.
Industry body Association of Mutual Funds in India (Amfi) would be releasing the latest statistics for the sector in the first week of December.
Industry executives are of the view that a strong and sustained rally is the need of the hour to pull investors back. But they were quick to add that retail investors' tend to come back only when markets peak. "That's not a right approach as that way investors burn their hands and lose faith in equities," says Datta.
An official from a large-sized fund says, "No fresh investment through systematic investment plans (SIP) is being made. Only the existing SIPs are the source of inflows, which are also dwindling." Cancellations of equity investment have now become a part of fund house daily routine. The pace with which new fund offers (NFOs) helped industry garner assets and expand equity investors base during the last bull run till early 2008, is now clearly reversing.
This year so far fund industry has lost over 3 million equity folios which is far higher than the shrinkage of equity investors' base in the previous year. And situation from here on is only worsening as several of the small and mid-sized fund houses have started trimming their retail operations.
Currently, there are around 44 players in India's asset management space. As on 31 October, net assets under management stood at Rs 7.68 lakh crore. Equity assets contributed around 24 per cent of it at around Rs 1.83 lakh crore.
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