Ninteen years after privatisation of mutual funds (MFs) in the country, the MF industry is still grappling to find a large number of unique MF investors. Last week, when the industry body, Association of Mutual Funds of India (Amfi), released data on its website, it quickly did a pullback, after data credentials were questioned. As per Amfi data, there are about 3.76 crore unique mutual funds in the country.
Even a cursory glance at the Amfi numbers makes one realise that the data is incorrect. After all, how could the number of MF investors, be more than that of direct equity investors. There are less than 2 crore direct equity investors today (based on demat accounts held); NSDL has 1.17 crore demat account holders, while it is 0.75 crore for CDSL. There are 1,400 MF offices in the country as against 90,000 brokers and sub-brokers who trade in equities on behalf of investors.
V Ramesh, deputy chief executive of Amfi clarified, ?There was some disconnect while calculating the unique investors numbers which has resulted in some confusion.? He said that the market regulator, Securities and Exchange Board of India (Sebi), has again asked all the fund houses to provide the unique investor details. However, industry officials said that still there is no clarity on calculation of these numbers. ?Unless all the know-your-customer (KYC) norms are fulfilled for new as well as old investors, it is difficult to calculate unique investors numbers.?
From January 2011 , Sebi asked all the MF investments to comply with KYC norms. However, that applies for fresh investments only. A CEO from a leading fund house said, ?Over a month ago we had received a letter from Sebi to provide details on unique investors numbers based on their methodology and we had already given the data?. While he was unaware of any situation where numbers had gone wrong, he said on an average an MF investor holds 5 folios in the country.
There are 4.72 crore folios in the country, as per Amfi data. Folio numbers are not akin to retail investor numbers. This is because a fresh folio is created everytime a new investment is made, even if it is from an existing customer, unless specified. If one was to assume that Amfi?s unique investor data (3.76 crore) was correct, it would imply that an MF investor on an average holds only 1.25 folios, which is very unlikely.
Ballpark estimates by the MF industry hint at an MF investor holding at about five to eight folios today. By that logic, we have close to 58-94 lakh unique investors.
Interestingly, back-of-the-envelope calculations also show that unique investors have probably reduced for the MF industry over the last decade. As per Sebi data, there were 3.02 crore MF retail folios in March 2002 which grew to 53% to 4.63 crore by march 2010. Yet, during this period, number of folios held by a single MF investor also grew from about four folios to eight. By that logic, the number of unique investors in 2002 should have been 76 lakhs.
Hence, the 18 lakh MF investors have exited the industry if the folio holdings are assumed to be eight per MF investor and 18 lakh MF investors entered if the folio holdings are assumed to be five. Only Amfi can now solve this conundrum.