Equity MFs' net selling at new high in FY13

Fund managers sell shares worth Rs 22,750 cr, 17 times of what they sold in 2011-12

Equity mutual fund (MF) managers broke previous records in selling shares when it came to their net investment in the financial year 2012-13.

With the benchmark indices surging for most of the year, continuous redemption requests from retail investors did not let the fund managers cash in on the rising markets. Rather, they sold shares worth Rs 22,750 crore during the period, when the indices gave returns as high as 15 per cent at one point in time. Interestingly, barring June, every other month of FY13 witnessed net selling, with investors busy exiting their investments at every rise in the stock markets.

This was close to 17 times of what fund managers sold in 2011-12. Continuous redemption pressure from investors forced fund managers to remain on a selling spree through the year.

After August, particularly, the selling pressure intensified. It jumped from a little less than Rs 400 crore during the start of FY13 to as much as Rs 5,200 crore in January.

Sector officials say at every rise in the markets, they faced redemptions, which intensified as the Sensex hovered near the 20,000 levels, a big psychological mark for investors. “Many investors had been stuck in the market for three-four years, since the markets' earlier peak levels. They were the first to exit, with whatever little gains they made,” explains Akshay Gupta, chief executive officer of Peerless MF.

The national sales head of a private bank-sponsored asset management company had earlier told Business Standard, “The industry's gross sales remained poor but redemptions continued unabated. To service investors who wanted to redeem, fund managers had no option but to take refuge in selling holdings.”

According to the Association of Mutual Funds in India, till February this year, the equity segment of the sector saw a massive net outflow of Rs 15,354 crore. In FY12, the overall net outflow from equities was in positive territory, at Rs 122 crore.

In the financial year till February 2013, the MF sector saw closure of 4.25 million equity folios, the largest in its history. During the year, assets under management of equity schemes declined to Rs 1.76 lakh crore as at February-end, against Rs 1.82 lakh crore the previous year.

Currently, the MF sector offers 342 equity-related schemes. Of these, 293 are equity-diversified and the rest are equity-linked saving schemes.