 "Equity mutual funds bulk up 75% as households rush in")
The year 2015 has been a historical one for India’s mutual fund sector — a year of new records. Whether it was retail investors' unexpectedly higher participation or fund managers' relatively stronger and more consistent ‘buy’ calls for equities or the highest ever assets under management (AUM) managed by the sector, 2015 was a terrific year for the sector.
It was probably the first time that domestic investors gave a strong counter balance to the selling by foreign investors. Put together, investors pumped in a massive Rs 87,000 crore in stocks through equity mutual funds — 75 per cent more than what the previous year witnessed. Fund managers, fully loaded with investors' money, used the opportunity to buy shares worth a whopping Rs 68,000 crore — nearly three times last year’s.
Milind Barve, managing director and chief executive of India's largest fund house HDFC Mutual Fund, says, “It was an unprecedented year in terms of any calendar year. It was a year which saw return of investors to equity as an asset class. The positive part was that investors have understood that the horizon should not be less than three to five years when it comes to equity investments. Possibly because of that, despite market corrections, inflows have remained strong.”
In 2015, strong inflows from domestic investors helped the sector attain an overall size of Rs 13 lakh crore — for the first time in its history. The pure equity assets, too, surpassed the mark of Rs 4 lakh crore — the first time ever. What’s interesting to note is the fact that incessant flows in equity schemes continued unabated despite a fall in key stock indices — which are currently about five per cent lower than last year’s and 14 per cent down compared to their recent all-time highs.
S Naren, chief investment officer of ICICI Prudential Mutual Fund, says, “One thing we have been highlighting for some time now is the underweight stance of Indian households in financial assets. Thankfully, this has made some progress in 2015. Making a small beginning, investors — big and small — have started investing in financial assets. 2015 has been a fairly good year for mutual funds, both equity and debt schemes.” It was not a complete smooth sailing for the mutual fund sector as the year was marked by several events as well, which kept the sector buzzing.
Commission structure change
Right from the beginning of the year, the sector was abuzz with restructuring of commission structure for distributors. Many feared the market regulator might intervene. However, Association of Mutual Funds in India (Amfi) took the lead and imposed best practices guidelines, putting a cap on upfront commission at one percentage point from April 1.
Confusion over service tax
In another blow to the mutual fund distributor, a service tax of 14 per cent was imposed on their income. There was a lot of confusion on this and it was not clear who would bear the brunt of it — the asset management companies (AMCs) or the distributors?
Both stakeholders wanted the other to pay it or impose it on the investors. However, it is learnt that the Securities and Exchange Board of India (Sebi) is not in favour of putting extra burden on investors. Till date, there is no clarity on the issue.
Mergers & acquisitions: Exits of two more foreign funds
Foreign fund houses continued to exit India. This year, Deutsche AMC and Goldman Sachs were acquired by Pramerica Mutual Fund and Reliance Mutual Fund, respectively. Meanwhile, Japanese insurance major Nippon kept on increasing stake in Reliance Mutual Fund. Recently, Nomura sold partial stake in its Indian mutual fund business LIC Nomura Mutual Fund. US-based fund management major Invesco bought out its partner's remaining stake in its India joint venture Religare Invesco Mutual Fund with Religare Enterprises.
Amtek Auto Episode
In a first-of-its-kind development, two of the debt schemes of JP Morgan AMC had to cap the redemption as debentures of auto ancillary firm Amtek Auto - one of the schemes’ holdings - were downgraded to ‘junk’ category. Fearing heavy redemption pressure, the fund house was quick to curtail the redemption request and invited widespread criticism from its peers and Sebi.
Two high-profile exits
The sector witnessed the exit of two high-profile fund managers. Kenneth Andrade, chief investment officer of IDFC Mutual Fund, called it a day in mid-June this year. Known as 'Mid Cap Mogul', Andrade's exit came as a big shock to the sector and investors. Within six months, UTI Mutual Fund's Anoop Bhaskar, head of equity, too, put in his papers. Known for his fund management, mid-cap in particular; Bhaskar enjoys respect among his peers.
B-15 surpassing T-15
Early this year, number of accounts from investors in the smaller towns and cities (known as B-15 cities) surpassed those coming from the top 15 metro cities (T-15). Sector officials put the number of accounts from B-15 at above 20 million.
Leo Puri becomes head of Amfi
Chairman and managing director of UTI Mutual Fund was made the chairman of Amfi against expectations that A Balasubramanian, CEO of Birla Sun Life Mutual Fund, would be Amfi's chairman once Sundeep Sikka's, CEO of Reliance Mutual Fund, tenure as chairman of Amfi comes to an end.
H N Sinor's good-bye
After six years as chief executive of Amfi, H N Sinor stepped down this year. When Sinor joined in early 2010, the sector was going through a tough phase. At his exit, the sector is back to its old golden days. C V R Rajendran, former chairman and managing director of Andhra Bank, is now the new CEO of Amfi effective from October 1, 2015.
