Retail investors are back; 400,000 new MF folios in April

Equity mutual funds registered a robust monthly jump in investor base, a first time in over four years, in April.

As many as 400,000 new accounts were added last month, a time when the market was scaling new highs. The MF sector has been seeing a continuous closure of folios, about 12 million since March 2009. At present, the total of equity folios is 29.56 million, as compared to its peak of 41.13 million in March 2009.

“Happy times are here again. We have been seeing a surge in retail (investing) since November. I am confident this trend is here to stay,” said H N Sinor, chief executive (CEO) of the Association of Mutual Funds in India.

Equity MF schemes had taken beating following the market crash due to the global financial crisis in late 2008. Investors who’d burnt their fingers with the market crash kept redeeming units at every opportunity, resulting in a sharp erosion in the MF equity investor base. In some months, the closure of folios was as high as 700,000.

Dhirendra Kumar, CEO of fund tracking firm Value Research, said: “There had to be an end to redemptions, which has happened now. The major factor for the rising number of equity folios is the close-ended new equity fund offers.”  He said most of the redemption pressure could be behind us and we could see new investors coming to the markets. “I am hopeful that good times are ahead,” he said, too.

Interestingly, pure equity schemes have seen major traction. Excluding the closure of folios seen in equity linked saving schemes, equity folio addition was nearly 500,000 last month, shows data from the Securities and Exchange Board of India.

Jaideep Bhattacharya, CEO, Baroda Pioneer, said: “These new investors are coming with a longer horizon. The past few months’ buoyancy in the stock markets have brought back the retail interest. High net worth individuals, in particular, are back as well. I think there will be more retail participation, though with a lag, post the election results.”

According to Sinor, strong policy initiatives from the new government will see a rise in retail participation.