Retail investors accessing stock markets through mutual funds (MFs) are getting out of the markets fast, thanks to the current sudden rally in equities.
A surge in stock indices fuelled by successive reform-related measures over the last fortnight is being used by MF retail investors as an opportunity to do away with their equity investments.
According to sector officials, a sudden acceleration in redemption requests was witnessed, especially in the last two weeks of September.
| ON THE WAY OUT Outflows from equity MFs* and folio closures so far 2012 | ||
| Net Inflow/(Outflow) | Equity folio closures | |
| January | -380 | 95,648 |
| February | -2,809 | 5,14,433 |
| March | 71 | 2,38,706 |
| April | -615 | 2,99,899 |
| May | 420 | 1,86,961 |
| June | -286 | 2,34,907 |
| July | -949 | 3,27,558 |
| August | -2,286 | 4,61,840 |
| All figures in~ crore * Includes ELSS Source : AMFI & SEBI | ||
During the month, benchmark indices gained close to eight per cent. For instance, the Bombay Stock Exchange index, the Sensex, jumped over 1,300 points in September and inched closer to the 19,000-points mark — a level not seen for long.
“Profit booking is rampant. On every rally, our investors are taking money off the table and closing their accounts,” says the national sales head of a large fund house. According to him, this was the general situation.
Though the redemption statistics would be released by industry body Association of Mutual Funds in India (Amfi) next week, industry executives fear net outflow of funds from the equity segment could exceed what was witnessed in August at close to Rs 2,300 crore. If that comes true, September might turn out to be the worst month for fund managers in the year.
Already, the pace of equity-folio closures is proving a dampener for fund houses. This calendar year saw 2.36 million equity folios being closed till August.
In August alone, equity investors’ base shrank around half a million, bringing overall equity folios to 36.1 million from 38.4 million in December last year.
“The sad part amid this rally is that fund houses could not participate and make gains, as these continued to sell equities so far this month,” says the chief executive of a mid-sized fund house.
True. According to the Securities and Exchange Board of India (Sebi), in September alone, fund managers sold equities worth Rs 3,008 crore. This is a huge outgo, when compared with the immediate past two months ago, when it stood below Rs 2,000 crore.
Currently, out of 1,272 schemes, which the fund industry offers, 350 are equity funds.
“I do not see investors moving out as a surprise. Rather, it’s natural for customers who had been stuck for the last few years. Even minor gains have made them get out of the markets,” the executive adds.
He further says distributors and advisors, too, are using the current rally to churn investments.
Officials add it’s not only retail; even high net worth individuals are actively booking profits. At a time when bank deposit rates are falling, investors are more than happy to book 10 per cent returns, they say.
As on August 31, net assets under management of the fund sector stood at Rs 7.52 lakh crore, of which equity assets comprised Rs 1.76 lakh crore.