Entry load's return boosts morale of MF industry

The Sebi's recent decision to allow one-time transaction fee on mutual fund schemes augurs well for the Rs 7.43 lakh-crore asset management industry which is grappling with the sagging fund inflows after entry-load was scrapped in 2009, say fund managers.

"Advisory fee along with a transaction fee of Rs 100-150 is very positive move. This would at least ensure that the distributor is not incurring losses. The very fact that Sebi has taken care of the transaction fee itself is good enough for the moment. I am very excited as the step is in the right direction. This move will especially benefit the agents," Reliance Capital Asset Management CEO Sundeep Sikka told PTI.

Edelweiss Asset Management CEO Vikaas Sachdeva, however, was guarded in his reply over the move.

"I foresee this as a precursor of much better things to come. The initiative will find its feet only over a period of time," he said, adding that an initiative like this reflects Sebi's openness to work with the industry to sort out issues dragging growth, one step at a time.

Reliance's Sikka is more optimistic. "We are sure that new investors will start coming back if distributors are incentivised to reach out to the new customers, especially in smaller towns. This is a win-win situation for everyone. The online channel will pick up and sales of systematic investment plans (SIPs) will definitely go up further," he said.

The number of active independent financial advisors (IFAs) more than halved to 20,000 from at least 50,000 in August 2009, when the markets watchdog scrapped entry-load that rattled the then vibrant industry.

Since August 2009, when Sebi banned entry load, the domestic MF industry has been bleeding.

According to the industry association Amfi, June saw an outflow of Rs 66,442 crore from the industry, a steep jump from Rs 48,850 crore that flowed out of the industry the previous month.