MF equity folios rise despite market volatility

Despite sustained market volatility, the mutual fund sector has added two million equity folios this financial year. According to data collated from the Securities and Exchange Board of India (Sebi), the period between April and October saw the addition of 2.14 million equity folios. While equity schemes saw the addition of 1.92 million folios, equity-linked saving schemes (ELSS) added 0.22 million folios. This was during a period when the benchmark BSE Sensex fell 4.6 per cent.

About 10,000 investors have opened equity accounts per day so far this financial year till October. In August and September, the sector added a million equity accounts, despite a sharp correction in the markets.

The sustained rise in the number of equity folios has been accompanied by inflows into equity schemes, with the category seeing robust inflows for the eighteenth straight month in October. So far in FY16, the equity segment has seen inflows to the tune of Rs 62,300 crore. This includes Rs 20,000 crore in inflows in April and May despite foreign brokerages scaling back their year-end Sensex targets.

In the past financial year, equity schemes saw inflow of Rs 71,000 crore ($12 billion). As of October, assets under management in the equity segment stood at Rs 3.56 lakh crore. Currently, the Rs 13-lakh-crore mutual fund sector offers about 440 equity-related funds to investors.

 

Market watchers feel the sustained increase in equity folios are a good sign as equity assets are a lot stickier than debt assets and can generate higher revenues. Fund managers have been advising investors to continue their systematic investment plan, or SIP, portfolios even during times of volatility.

"One primary driver of folio additions has been the rise in systematic investment plans, which have picked up pace in the last few months," said G Pradeepkumar, chief executive officer, Union KBC MF. "High net worth individuals and even retail investors have become more mature now and are using the dips to buy fresh units."

Even debt funds saw an appreciable rise in the number of folios to the tune of 0.45 million folios to 7.64 million folios in October. Long-term bond funds, in particular, have benefited with the 125-basis-point rate cut effected by the Reserve Bank of India this calendar year.

Balanced funds saw an addition of 0.22 million folios, while gold exchange traded funds (ETFs) saw an erosion of 22,751 folios in the past seven months. ETFs that track equity indices added 15,621 folios during the same period. Total folio count across all categories rose 2.8 million to 44.8 million in October from 42 million in April.