Equity MF managers would like to forget FY13

Around 4.5 million folios met closures; pushing sector to sub-2008 levels

India’s equity mutual funds (MFs) lost a little over 12,000 folios daily, on an average, in 2012-13. Such a high erosion of equity investors’ base has pushed the sector back to pre-2008 levels, as close to 4.5 million accounts were closed during the year.

Despite being a year when the country’s benchmark indices surprised market participants by moving unexpectedly higher, retail investors would close their accounts and exit the markets at every rise.

The net outflows from equity schemes touched an all-time high, gross sales remained poor and incessant redemption requests did not let the equity category grow. This not only depressed the sector’s sales and marketing heads but also made life difficult for investment managers, who could not participate in the rally as redemption pressure kept forcing them to liquidate holdings from time to time.

“Through the year, investors have been fleeing the market with whatever gains they were sitting on. A majority of these were those who had been stuck in the market for two-three years,” said Akshay Gupta, managing director of Peerless MF.

On several occasions, sector officials told Business Standard that business cycle was not improving. “Unless gross sales pick up substantially, it’s hard to beat the consistent demand for redemptions,” explained the national sales head of a private bank-sponsored fund house.

Ajit Menon, executive vice-president of DSP BlackRock, had earlier told Business Standard that fresh money flowing in was lesser than the outflows from equities.

Sector officials said investors have been seeking answer to what constitutes long term. “We, as an industry, have been selling equities to investors from a three-year perspective. This did not go well, as despite the passage of over four years, the truth is investors did not make money,” explained the chief marketing officer of a large-sized fund house.

Though encouraging fund inflows at the ending month of FY13 brought some cheer to MF executives, many would wish to forget the year. Even in March, when net inflows turned reasonably positive in equities, the sector ended with a loss of another 223,000 folios.

Year	Number of equity folios
2006-07	2,53,76,347
2007-08	3,77,66,259
2008-09	4,11,31,623
2009-10	4,11,31,623
2010-11	3,92,90,289
2011-12	3,76,47,466
2012-13	3,31,74,188
Source: Securities and Exchange Board of India (Sebi)