Equity folios' closure pace slows in February

About 230,000 equity folios closed, compared to 400,000 and more in earlier months

Despite declining gross sales in the equity segment, the country’s mutual fund (MF) sector has something to cheer about. Its largest client base, the retail investors, did not shrink as fast in February as was the case so far in the current financial year.

At a time when equity schemes came into the limelight due to the sharpest decline in asset under management (AUM) in 15 months, the near-halving of equity account closures is some respite.

Data from the Securities and Exchange Board of India (Sebi) show a closure of 230,000 equity folios in February, far less than the average monthly loss of a little over 400,000 till the immediate previous month.

“It is a reduction but we (industry) are still in negative territory," says Karan Datta, national sales head of Axis MF. Since the markets had a run-up, it seems customers chose to continue their investments, he adds.

Till June 2012, the number of accounts closures ranged between 180,000 and 300,000 a month. In the second half of the calendar year, the pace accelerated, with some months seeing half a million folios getting closed.

Sector officials say February saw less of cancellations of systematic investment plans but fresh purchases also declined. Overall net outflow from the equity segment was the lowest in many months at Rs 163 crore. Gross sales of equity schemes dipped 33 per cent to Rs 3,713 crore though, against Rs 5,600 crore in January.

Currently, MFs offer 342 equity-related schemes, of which 293 are diversified schemes and the other 49 are equity-linked saving schemes. The overall AUM of equity schemes was Rs 1.76 lakh crore as on end-February.

In December, MFs saw the closing of as many as 600,000 equity accounts. For the first 11 months of 2012-13, from April 2012 to February 2013, the sector lost 4.25 million equity folios, the largest ever it has seen in such a period. Overall net outflow from equity was Rs 15,350 crore in the period.