Equity folios rise most since 2008

Strong gains in the stock market, return of SIP investors and rising number of NFOs help the segment

Mutual fund (MF) equity schemes saw an addition of 406,000 folios last month, highest rise in such a period since the global financial meltdown in 2008. This came amid a sharp rally in the market, following the unexpected rate cut by the central bank.

The equity MF investor base is 31 million, the highest since September 2013. This robust addition in investor accounts is a big positive for the asset management sector, witnessing its highest till date gross inflow into the more profitable equity segment.

Assets under management (AUM) for the sector are a record at Rs 11.85 lakh crore. (REGAINING LOST GROUND)

“A couple of factors are helping the equity segment of the sector. First, strong gains in the stock market have attracted a lot of new investors to MFs. Further, those who’d stopped investing through Systematic Investment Plans (SIPs) are back into the market. Finally, the rising number of new fund offers (NFOs) in the equity space has helped raise the number of investors,” said G Pradeepkumar, chief executive officer, Union KBC MF.

In January alone, eight equity NFOs hit the market , garnering a little over Rs 2,300 crore. “Investment through SIP mode has seen a visible pick-up. Not only have they improved; the average size is between Rs 3,500 and Rs 4,000,” said Sundeep Sikka, chief executive officer, Reliance MF.

Investments through SIPs have always been helpful for the sector, as most of the assets gathered via this route are sticky in nature and continuous. Gross sales in equity schemes were Rs 13,000 crore in January.

Milind Barve, managing director of HDFC MF, the country's largest fund house, said investors were moving away from physical assets like gold and real estate to financial assets like equity and fixed income. That gold as an asset class has taken a back seat is also evident from the tepid flows into exchange-traded funds (ETFs) based on the precious metal. The 14 gold-related ETFs saw a net outflow of Rs 130 crore last month.

The investor additions in January came as the benchmark Sensex of the BSE exchange was nearing the 30,000-mark. The National Stock Exchange's Nifty neared the 9,000-level.

The largest addition in investor accounts during 2007-08 was just ahead of the market crash triggered by the sub-prime crisis in the US. Those in the sector say the market is not as heated as in January 2008. According to them, there is a lot more room for indices to go up and, thereby, a lot of potential for more from domestic investors.

“The long-term outlook looks far more positive than in early 2008,” adds Pradeepkumar.

Even on folios, the MF sector has 10 million less investor accounts than in 2008, when the peak folio count was 41 million.