New fund offers prosper amid a weak market

According to AMFI data, Rs 12,079 cr came into new schemes in January alone.

In a month when stocks crashed by more than 19 per cent from their highest levels, new fund offers by mutual funds attracted decent inflows.

According to data from AMFI (Association of Mutual Funds in India), Rs 12,079 crore came into the new schemes in January alone. In December 2007, inflows were to the tune of Rs 10,273 crore.

Past data, however, show that mutual funds suffer after every market crash. For instance, during May 2006, when the Sensex fell by 13.6 per cent, fresh inflows into mutual funds were just Rs 8,635 crore. The figure dropped a whopping 14 per cent to Rs 7,421 crore in June.

However, it has been different this time. For example, the Reliance Natural Resources Fund, which closed on January 30, collected Rs 5,660 crore -- "" the second largest collection by any new fund offer.

Said Samir Kamdar, country head, Mata Securities, "The realisation has dawned upon retail investors that mutual funds are a long term product. Investors have become more mature and investment-savvy and they see every dip in market as a reason to buy into the India growth story."

Distributors said it is only retail investors and HNIs who are pouring money into mutual funds -- new schemes as well as the existing ones -- since January. "Institutions have generally kept away from investing in mutual funds", pointed out a distributor.

Provisional figures from BSE reinforce the fact that domestic institutions, which include mutual funds, have pitched in Rs 18, 373.13 crore since the beginning of this calendar year.

Since the mutual funds returned 60 per cent last year, which is more than Sensex returns, many investors have become addicted to this bull-run.

Even during market crash this year, most of the mutual funds were fully invested. This marks a significant shift in strategy, as the

MFs generally used to be fence-sitters.

MFs are now being considered as the best investment tool for retail investors and with savings rate in India at 32.4 per cent, this money is being channelised into the equity markets.

Vikrant Gugnani, President and CEO, Reliance Capital AMC said, " The growth of industry should also be seen in the light of steps taken by market regulator Sebi to make mutual fund investing easier and industry's efforts to launch innovative schemes, develop strong distribution network to help proliferate the MF concept to semi-urban and rural masses."