When the mutual fund sector got a net inflow of Rs 506 crore in May, it surprised fund managers. What made them suspicious of the positive news was the continuous cancellations of systematic investment plans (SIPs).
The cancellations have been confirmed to be true. In May, another 186,000 equity folios were closed, according to data from the Securities and Exchange Board of India (Sebi). This took the overall equity folio closures in the current financial year, since April 1, to close to half a million.
"This is pathetic. It's increasingly getting difficult to keep investors stay invested. Inflows are nothing to cheer about, especially when there is no stopping folio closures," says the chief marketing officer (CMO) of a large asset management company.
According to sector officials, there are more of cancellations than terminations of SIPs. With consistent bad market sentiments and attractive interest rates, investors are not keen on equity products.
"Once the investor is out, it's a tough task to bring him/her back in a situation like this. Acquisition costs involving retail investors are high," adds the chief executive officer of a medium sized fund house.
The factors making investors stay away include negative returns from equity schemes over the past two to three years and no proper counselling by distributors and advisors. "Though we are trying our best, there is a prevailing negative perception among investors regarding equity investments," adds a CMO.
All equity categories, barring international equity funds, witnessed negative returns over the past year, show statistics from Value Research Online. Some categories have given a negative return of as high as 16 per cent.
Debt funds continued to attract investors, as the number of folios in the category increased by 81,000. Investors' base in gold exchange traded funds rose, too.
Overall front, taking into account all the asset categories, the industry lost 111,000 folios, pulling down the MF investors' base to 46.1 million in May from 46.2 million in April.
So far in 2012-13, the overall net inflow of all asset categories together is in positive territory at Rs 1,19,488 crore. The major chunk of the inflow has come through liquid and money market schemes.
