India's nascent mutual fund industry has lost over 11,000 equity folios a day in the first half of the current financial year.
The pace with which fund houses were losing their equity investors in the first few months of FY13 has only got accelerated further. The September rally in the stock markets has proved disastrous for the Indian mutual fund industry as far as their hard-earned retail investors' base is concerned.
In just a matter of a month, when benchmark indices galloped 8%, fund industry saw closures of a whopping over half-a-million equity folios. This is the highest ever for a single month since the data is available.
With this, equity investors' base for fund industry got shrunk by over 2 million in just six months, which interestingly is higher than what was witnessed in the entire previous financial year.
Gain and loss of equity folios since FY05
| Year | Number of Equity Folios** | Average Gain/Loss of folios per day |
| 2012-13* | 3,55,63,923 | (11,385) |
| 2011-12 | 3,76,47,466 | (4,500) |
| 2010-11 | 3,92,90,289 | (5,009) |
| 2001-10 | 4,11,18,785 | (35) |
| 2008-09 | 4,11,31,623 | 9,220 |
| 2007-08 | 3,77,66,259 | 33,945 |
| 2006-07 | 2,53,76,347 | 22,295 |
| 2005-06 | 1,72,38,776 | 22,459 |
| 2004-05 | 90,41,075 | 2,760 |
| *Till September, 2012 | ** Including ELSS | ||
According to statistics released by the capital markets regulator, Securities and Exchange Board of India (Sebi), total equity folios stood at 3,55,63,923 as on 30 September, 2012.
Highest net selling in the stock markets during the month by fund houses coupled up with the largest net outflows from equities had indicated that September would prove a dampener for the sector.
And it came true. "It's all profit booking, nothing else. People had not seen such levels for long and had been stuck for long. At every single rally investors took money off the table and shut their accounts," says chief executive officer of a mid-sized fund house.
Interestingly, during the heydays of the sector in 2007-08, when indices were climbing to newer highs, fund houses added as many as 34,000 equity folios a day. However, later, abolition of entry load on equities in August 2009 kept distributors away, leading to a sharp fall.
According to Dhruva Chatterjee, senior research analyst at Morningstar India, says, "This clearly shows that investors have become wiser. Those who could not book profits quickly in the previous rallies and missed the opportunity swiftly moved out this time."
During February this year too, when markets had rallied fast, retail investors had shown the same trend as during that period too over half-a-million equity folios were closed.
Last month, mutual fund equity managers sold equities worth Rs 3,200 crore while the segment saw a net outflow of Rs 3,559 crore. Currently, fund industry offers around 350 equity related schemes.
