And here it comes. As was feared, September has turned out to be the worst month for mutual fund industry so far this year in terms of net outflows from equity schemes.
Amid heavy net selling by fund houses during the rally last month, equity schemes (including equity linked saving schemes or ELSS) witnessed a net outflow of Rs 3,559 crore - highest in last 24 months.
This essentially means that inflows of funds in equity assets were far lesser than what got redeemed. In absolute term, the segment saw redemption requests for equities worth Rs 6,741 crore against fresh investment of a mere Rs 3,182 crore.
This, not only marked September the current year's worst but also the poorest in last two years. Interestingly, it was in September, 2010 when industry equity segment had seen the previous high outflows of a whopping Rs 7,281 crore.
Industry executives said at every single day rally investors had booked profits. These investors are mainly those who had been stuck in the markets for over a year, they added.
It was well evident from the fact that equity fund managers remained net seller in September. Though it was not a new trend as for several of the past months, mutual fund industry was a net seller. But September saw heavy selling to the tune of Rs 3,200 crore - not seen for many months, on the back of continuous redemption requests.
During the month, benchmark indices were up around 8%. BSE's Sensex gained over 1300 points and inched towards 19,000 mark. "Major part of the redemption pressure came in the latter half of the month which also contributed in not letting fund managers have active participation in the rising markets," explained an industry chief executive.
What is worrying is the fact that retail money is going out as over 90% of the equity assets is contributed by retail and high networth individuals (HNIs). Folios are being closed rapidly, systematic investment plans (SIPs) are being terminated.
According to CEO of the one the top five fund houses, "Cost of acquisition of retail clients is high. When such customers move out before their investment tenure it obviously impacts the fund industry. But at the end of the day we cannot cry foul over it as ultimately it is investors' money and he booked profits, which is good for him/her."
| Month | Net outflows from equities |
| Sep 2012 | 3,559 |
| Aug 2012 | 2,286 |
| Feb 2012 | 2,809 |
| Oct 2010 | 3,063 |
| Sep 2010 | 7,281 |
| *including ELSS | all figures in Rs crore | |
Already this year, more than 2 million retail equity folios have been closed. In August alone, 4.6 lakh equity folios were closed. Sector officials say folio closures could be higher in September too. Later this month, capital markets regulator Securities and Exchange Board of India (Sebi) will release its folio statistics.
In other categories, liquid and money market segment had Rs 48,445 crore as net outflow while income funds saw a relatively lesser outflow at Rs 256 crore. Overall net outflow from the mutual fund industry in September stood at Rs 51,908 crore.
