Equity schemes lose 8.33 lakh folios since November 2009

August 11, 2010 05:32 PM
Ravi Samalad
Source: http://www.moneylife.in/article/8/8129.html

After witnessing Rs3,400 crore redemptions in July, equity schemes shed 2.93 lakh investor accounts. Instead of expanding the investor base, SEBI is presiding over a shrinking investor population.

Despite a 9% GDP growth and a booming stock market, mutual fund investors are still shying away from equity schemes and trying their luck in debt funds. Since November 2009, three months after the ban on entry load on mutual funds, the industry has lost a whopping 8.33 lakh equity folios till July 2010. The benchmark BSE Sensex has risen 8% since November 2009. According to the latest data available on the Association of Mutual Funds in India (AMFI) website, the 40 fund houses have together lost 1.66 lakh investor accounts in the month of July.

Equity funds witnessed Rs3,400 crore redemption in July despite the launch of two new schemes.

Debt funds added 1.18 lakh investor accounts in July while Exchange Traded Funds (ETFs) saw their investor base rising by 27,467. Fund of Funds, which invest in other funds, lost 7,955 folios.

Balanced funds, which invest a part of the corpus in equity, lost 10,459 folios in July. The total investor base or number of folios as on July 2010 stands at 4.77 crore. The five heavyweights of the industry together lost 93% (1.55 lakh investor accounts) of the total 1.66 lakh slump in folios. However, HDFC Mutual Fund bucked the trend by adding 23,544 investor accounts.

"There is a fear of the direct tax code (DTC) being applicable on capital gains. Some distributors are suggesting that investors pull out the money and re-enter afterwards. There is no clarity on the DTC yet. Some people are taking their own decisions. There is also some profit-booking," said a marketing head of a fund house.

Equity scheme folios declined by 1,47,745 last month despite a slew of launches like Baroda Pioneer Infrastructure Fund, Birla Sun Life India Reforms Fund, DSP BlackRock Focus 25 Fund, ICICI Prudential Nifty Junior Index Fund, IDBI Nifty Index Fund and Taurus Nifty Index Fund.

"Most of it is being redeemed because of the frequent and confusing changes in mutual fund regulations," said an industry source. Since last August, market regulator Securities and Exchange Board of India (SEBI) has made frequent changes such as removal of entry load, changes in cost structure and also who gets the trail commissions when investors switch from one scheme to another. "SEBI's mandate is market development and investor protection and what we are witnessing is a shrinking investor base. Some serious rethinking is needed is needed about SEBI's recent actions," says a mutual fund head.

IFA Galaxy Thanks Mr. Shankar S, Credo Capital for this update