Mutual fund houses have once again failed to arrest the consistently shrinking equity investor base.
A day after industry body Association of Mutual Funds in India (Amfi), in its latest monthly data, showed higher redemptions from equity schemes at Rs 2,300 crore, statistics released by market regulator Securities and Exchange Board of India painted a more worrying picture of the ailing fund industry.
In August, in one of the sharpest declines in the number of equity folios, the industry lost 460,000 folios (including those of equity-linked saving schemes). This took the overall number of equity folio closures in the current calendar year to a massive 2.36 million.
For an underpenetrated industry, such large closures are a big cause of concern. Industry executives continue to remain clueless on how to prevent their clients from exiting mutual fund investments.
They maintain that they are making all possible efforts, from investor education programmes to one-on-one interactions with clients; but somehow all attempts are proving not fruitful.
According to chief executives of fund houses, consistent record of poor performance of equity investments over the last few years and other avenues looking more attractive in terms of return are more than enough to keep investors at bay.
"They are investing in real estate and gold. Moreover, high interests on banking products, be it fixed deposits or recurring deposits, are being preferred by investors. And this will continue till equity markets rally and deposit rates decline below eight per cent," says the chief executive officer of a mid-sized fund house, requesting anonymity.
Meanwhile, the industry's overall folios across the category of schemes stood at 45.3 million in August against 45.7 million last month.
Debt funds continued to see more traction. But in comparison with the losses in the equity category, the fresh addition in debt schemes was only 10,000. Interestingly, gold exchange traded funds witnessed a decline in investors’ base as it fell around 6,000.
During the month, fund categories, including balanced, gilt and other exchange-traded funds, saw net outflows. Liquid and money market schemes continued to pull in more fresh inflows at Rs 14,775 crore, while income funds saw net inflows of Rs 7,548 crore in August. According to Amfi, industry's overall net assets under management as on 31 August stood at Rs 7.52 lakh crore against Rs 7.3 lakh crore as on 31 July.
