 "Investors slim down MF holding period")
The percentage of equity assets of Indian mutual funds with a holding period of more than two years has declined in this financial year.
At the beginning of 2015-16, 44 per cent of equity assets stayed invested for more than two years. However, as the market sentiment turned bearish, these have dipped to 37 per cent.
C V R Rajendran, CEO (chief executive officer) of the Association of Mutual Funds in India (Amfi), said, "Investors tend to move out when the markets are high. Even in balanced funds, they tend to move from equity to debt. This may have led to the dip."
Rajiv Shastri, CEO of Peerless Mutual Fund, said, "A set of investors may have been booking profits, which is leading to the decrease in assets with more than two years’ investment period. One can also not rule out the possibility that investors may be shifting from funds performing poorly to better ones.”
April to December 2015 witnessed a rise in gross redemptions and, of late, there have been declines in net inflows in the equity segment. One factor that led to the fall in the percentage of two-year-plus equity assets is the robust inflows during the first three quarters of 2015-16, which helped equity assets surge to a new high of Rs 4 lakh crore in December from Rs 3.4 lakh crore in March.
Kaustubh Belapurkar, director (fund research) at Morningstar India, said, "In percentage terms there is a fall because overall equity assets have increased considerably. In absolute terms there will be rise in assets with a two-year horizon. Further, the first nine months saw strong inflows, which is new money and may not have qualified for the two-year period yet."
April-December saw collective net inflows of nearly Rs 70,000 crore, which was almost equal to inflows during the previous financial year.
Equity assets had declined to as low as Rs 1.65 lakh crore in 2013. This rose to Rs 1.92 lakh crore just a month before the new government took over in May, 2014. Since then, the equity asset size has more than doubled.
Industry executives believe that anything less than three years in equity as an asset class is not advisable. But they maintain mutual funds should be seen as long-term investments.
