Despite a positive investment trend in equity investment through mutual funds since November last year, the industry could not see an overall net inflow in its equity segment for the financial year 2010-11.
The fund market saw a huge net outflow of Rs 13,405 crore from its equity assets, compared with a net inflow of Rs 595 in the previous financial year. According to Dhirendra Kumar, chief executive officer of Value Research (which tracks the Indian fund industry), “This is the highest outflow so far in absolute terms.” The underperformance of the equity markets kept the investor sentiment subdued during the first half of the year, when the redemption from equities reached as high as Rs 7,000 crore on a monthly basis.
“There was no trigger for fresh investment in equities early last year. Underperformance of the capital markets slowed fresh fund flows in equities. Moreover, distributors’ continuous unwillingness to sell equity products hampered asset build-up in the equity category, too” says R S Srinivas Jain, chief marketing officer at SBI Mutual Fund. In agreement, Kumar adds, “Investors pulled out money at every surge of the equity markets last year, which stopped fresh money coming in.”
Fund managers now have an optimistic view on equities, as they hope investors are coming back gradually. Arindam Ghosh, chief executive officer of Mirae Asset Mutual Fund, says, “The last few months have shown positive flows in equity schemes. Investors’ conviction seems to have come back on track as during corrections, the last quarter saw people participating in the market.”
| LOSING OUT Net inflow/(outflow) from different asset classes | |||
| Category | Net Inflow/(outflow) | ||
| March, 2011 | 2010-11 | 2009-10 | |
| Income | (30,612) | (36,706) | 96,578 |
| Equity | (124) | (13,405) | 595 |
| Balanced | 231 | 1,344 | -693 |
| Liquid/money market | (98,255) | (3,520) | (12,073) |
| GILT | (5) | (116) | (3,297) |
| ELSS-equity | 576 | 266 | 1,554 |
| Gold ETFs | 648 | 2,250 | 804 |
| Other ETFs | 107 | 1,388 | (20) |
| Fund of funds investing overseas | (17) | (907) | (367) |
| Total | (1,27,451) | (49,406) | 83,081 |
| All figures in Rs crore Source : Association of Mutual Funds in India (Amfi) | |||
In February, the mutual fund market saw its highest net inflows in the equity segment since the entry load ban was imposed in August 2009. The month witnessed close to Rs 2,500 crore of fresh money in equity schemes. The main supporting factor that resulted in higher inflows during the month was the consistent rise in systematic investment plans. Investors preferred monthly investment over a lump sum. According to statistics from the Securities and Exchange Board of India, during the second half of the previous financial year, the pace of equity folio losses was arrested. The industry lost a little over 200,000 folios after September. Interestingly, in the first half of the year, the industry lost close to 1.7 million equity folios, an average loss of around 300,000 folios every month.
