Equity MF folio addition remains strong

900,000 accounts added in January and February, even as Sensex fell 12%

Equity mutual funds (MFs) have seen a spurt in new investor accounts during sharp falls.  In the first two months of the year, when the benchmark Sensex fell nearly 12 per cent, the sector added about 900,000 new folios, a fourth more than the monthly average addition in 2015.

An analysis of monthly addition showed a spurt whenever the market underwent a sharp correction. For instance, August 2015 saw addition of over 500,000 accounts or folios, even as the Sensex fell six per cent.

Those in the sector say new sets of investors have entered the market to take advantage of the fall. Last month, net inflow into equity schemes fell to a 21-month low at Rs 2,500 crore but gross inflow remained high at Rs 11,000 crore. Which would mean some existing investors might be cashing out (gross redemptions were Rs 8,000 crore) but incremental investors are also coming in.

There have been four million new accounts in 2015-16, taking the total equity folio count to 35.61 mn. It was 29 mn in March 2014. The peak was 41 mn in 2009.

Increase in penetration in the smaller centres and awareness programmes pushed by market regulator Sebi and asset management companies have helped, say those in the sector.

Experts say the portion of systematic investment plans in total flows has increased, which could help maintain these. The estimate is Rs 3,000 crore a month through this route.