Sebi concerned over poor MF penetration

The capital market regulator Securities and Exchange Board of India (Sebi) has expressed concern over the low penetration of mutual funds (MFs) in the country.

Sebi Chairman U K Sinha, who was here to inaugurate the regulator’s southern regional office, said, he is worried about the lack of growth in penetration of MFs in the country.

At a time when the domestic mutual fund industry is reeling under pressure and has continuously been losing investor confidence, several investor awareness programmes by fund houses and industry body Association of Mutual Funds in India (Amfi), have failed to attract investors.
 

WORRISOME

• Sebi's chairman U K Sinha expresses concern over low MF penetration
• Says no one has brought the issue of entry load
• Profit booking leading to decline in MF folios
• Investors should not be carried away by short-term market developments
• Equity markets are for long term perspective
• Sebi is setting up 10 regional offices

Industry experts say abolishing entry load back in 2009 is playing havoc with the industry and has reduced distributors’ interest in selling mutual funds as investment products. However, on this issue, he said, “No one has brought the matter to us.” Bad market conditions have made matter worse for the industry.

According to the latest industry folio numbers, penetration continues to be poor at less than four per cent. Moreover, close to three-fourth of the fund industry’s assets come only from the country’s top five cities - Mumbai, Delhi, Bangalore, Chennai and Kolkata. According to Sinha, people are trying to book profits, as a result of which folios are declining.

The regulator said it was setting up new regional offices, which will not only clear proposals of initial public offerings (IPO) but also will be delegated powers with respect to mutual funds. Sinha said Sebi will open 10 new regional offices, which can clear proposals of IPOs of up to Rs 500 crore.

When asked about the variable load, he said, he could not comment on proposals in the minds of certain people. But he added that the regulator would take a view depending on what was best for the market.

On the current weak and volatile markets giving shocks to investors, Sinha said, investors should look at markets on a long-term basis. There will be periods when markets do well and periods when it does not. Investors should not get carried away by short-term developments, he said.

On listing of insurance companies, Sinha said, “Issue and norms for listing life insurance companies are now clarified between us — Sebi and Insurance Regulatory Development Authority (Irda), it won't take much time.”

Issues related to listing of non-life insurance companies are being discussed with Irda,” he said.