Finally, retail is back with a bang in equity schemes

Pumps in over Rs 1,000 cr of fresh money; hits 27-month high

India's retail investors in diversified equity mutual funds are back with a bang, finally.

In December, first time since September, 2011 the net investment in equity funds has decisively surpassed the Rs 1,000 crore mark in a month. This makes it a 27-month highest net inflow in diversified equity investments. Thanks to the higher sales of equity products that redemptions value fell short of fresh investments.

The positive development is certainly a long awaited relief for the country's fund managers who had been feeling disappointed with high levels of redemptions, almost on a monthly basis.This not only forced them to sell their holdings but also kept them away from reaping the benefits out of a rising market last year.

There is more. The good news for the industry does not stop here.

Sales of equity schemes is also on the rise. Rather, the fresh equity sales were the highest since August, 2011 as it stood at Rs 5,301 crore during December. Against an average monthly sales of Rs 3,000 crore, the latest sales figure is a big jump for the industry.

Industry sources had told Business Standard  that since mid of December, there was a clear trend of inflows outpacing outflows. "It would be this high was not expected. It's good for the sector," said a surprised chief marketing officer.

The trend could easily have been deciphered by the investments made by the fund managers during last month. Suddenly, they had turned net buyers of equities. This helped the industry to reduce its net selling process considerably to as low as Rs 410 crore - lowest in last six months. This could have happened only if the inflows had been on the rise.

However, amid this what continues to remain worrisome is continuation of higher redemptions. Though, sales were high, redemptions continued to remain well above Rs 4,000 crore last month too.

According to fund managers, higher sales are saving them for last few months. "If redemptions decline and sales continue to remain high, net inflows will get a further boost," said CEO of a small fund house.