MFs garner over Rs 1 lakh cr from investors in Apr-Dec 2012

A revival in stock market and a slew of reform measures are the reasons

Investors have put in more than Rs 1.2 lakh crore in various mutual funds in first nine months of the current fiscal compared to a cumulative net outflow of over Rs 70,000 crore in the previous two financial years.

A revival in the stock market and a slew of reform measures taken by the government and regulator Sebi may help the mutual fund industry mobilise further funds in the coming months, say experts.

As per the latest data available with Sebi, there was a net inflow of Rs 1,20,269 crore between April and December 2012, as against total fund mobilisation of Rs 36,918 crore in the corresponding period of last fiscal 2011-12.

However, there was a net outflow of over Rs 22,000 in the entire 2011-12, while a net amount of more than Rs 49,000 crore moved out of the mutual funds' kitty during 2010-11.

Prior to that, mutual funds had mobilised Rs 83,000 crore in 2009-10, Sebi data shows.

At gross level, mutual funds mobilised over Rs 53.10 lakh crore in April-December period of current fiscal, while there were redemption worth Rs 51.90 lakh crore as well. This resulted in a net inflow of over Rs 1.2 lakh crore.

This significant level of fund mobilisation has also helped the total asset under management of mutual funds to grow to Rs 7.6 lakh crore as on December 31, 2012.

Mutual funds pool together money from many investors and invest it on their behalf, in accordance with a stated set of objectives.

Market analysts expect the trend to pick up in the coming weeks, as the government and Sebi have expressed their intention to revive equity culture in the country and help channelise the household income into stocks, mutual funds and insurance sectors, rather than in 'idle' assets like gold.

Strong FII (Foreign Institutional Investors) inflows has pushed up the BSE's benchmark Sensex by over 2,000 points or 11.62% in the first nine months of the current fiscal.

"The current market conditions and wide-ranging reforms announced by Sebi to re-energise the mutual funds industry would help the sector to channelise funds in the equity market," Sudip Bandhopadhyay MD and CEO at Destimoney Securities said.

He also said stock market and mutual funds stand to attract more investments from the Rajiv Gandhi Equity Savings Scheme, but it could be initially complicated for first-time investors.

Another analyst Wellindia President (Research) Vivek Negi said," a number of steps taken by the Sebi for the benefit of mutual fund industry and revival in the stock market on the back of various economic reforms measures undertaken by the government are expected to help the mutual fund industry to invest in the equity market."

Besides, investment by mutual funds in equity schemes continued to increase in the past three months.

As part of its reform measures, Sebi has made investments in the mutual funds schemes a simpler and safer.

Besides, fund houses would have to make more disclosures in the interest of investors. They also have to shift to the one plan per scheme model, moving away from the present practice of cluttering one scheme with numerous plans.

At the same time, fund houses will be able to charge their investors a little bit more as incentive for expanding to small cities, but would also have to set aside a small portion of their assets for investor education and awareness.

Moreover, the government has recently taken a number of reform initiatives like opening FDI to multi-brand to retail sector, aviation and broadcasting sector, hiking diesel prices, capping the number of subsidised LPG cylinders.

The government has unleashed a second wave of economic reforms by deciding to open the pension sector to foreign investment and raising the FDI cap in insurance to 49%, among others.