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| Fund houses fail to cash in on market boom |
| Ronak Shah / Mumbai Oct 08, 2009, 00:29 IST |
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Launch 14 schemes compared with 19 during the recent slump.
Considering over 100 per cent price appreciation in the secondary market since March 9 this year, mutual fund (MF) houses have failed to cash in on the boom as they launched only 14 equity schemes to mobilise Rs 3,841 crore. Surprisingly, in a down market, fund houses had launched 19 equity schemes between April and August 2008 and mobilised Rs 2,489 crore.
The Securities and Exchange board of India’s (Sebi) order banning entry load and another order asking fund houses to differentiate new schemes from the existing ones acted as a barrier. After the Sebi order, distributors were reluctant to sell new fund schemes, while fund houses avoided relaunching of schemes, said Surajit Misra, national head (mutual fund), Bajaj Capital.
The participation of retail investors in new schemes was much lower this time as compared to the boom period of 2007 when they invested huge sums in both initial public offers (IPOs) and new fund offers (NFOs), Misra added. Retail investors seem to have changed their investment strategy by shifting focus from equity funds to IPOs or investing directly through the secondary market.
With a buoyant secondary market, 11 IPOs have hit the capital market this year so far and they have received tremendous response from retail investors. These investors applied for shares worth of Rs 11,327 crore and ,in turn, were allotted shares worth Rs 3,925 crore. The IPOs from NHPC (Rs 6,570 crore), Adani Power (Rs 2,518 crore) and Oil India (Rs 1,275 crore) were well received by retail investors, while the remaining eight received application worth of Rs 983 crore.
Sundeep Sikka, chief executive officer, Reliance Mutual Fund, said retail investors have become more selective now. Now, they check the track record and brand name of a fund house and look at the kind of product before investing. New and innovative products would definitely attract retail investors. Timing of the fund launch is also very important, Reliance Infrastructure fund was new and innovative theme and it were launched at the right time because of that it attracted large number of investors and able to moped up Rs 2,300 crore.
In the past, fund houses were getting good response for NFOs. In March 2005, when the Sensex was around the 7,000 level, 8 new schemes raised Rs 7,016 crore. In March 2006, Rs 10,228 crore was raised by 12 schemes when the Sensex moved above the 10,000 level. In January 2008, when markets hit an all-time high, 6 new schemes raised Rs 9,000 crore.
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