BSE Sensex soars, investors cash out

Apr 12 2014, 01:31 IST
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Experts believe that long-term investors, sitting on losses, have been particularly keen to exit their investments during rallies. Reuters Experts believe that long-term investors, sitting on losses, have been particularly keen to exit their investments during rallies. Reuters
SummaryIndian equities may be at new highs but small investors aren’t feeling brave enough to hold on to their equity investments, reports Ashley Coutinho in Mumbai.

investors who entered the market in 2007 and early 2008 have been particularly keen on exiting during market upmoves.

Folio closures have remained steady throughout FY14. The number of account closures touched a high 6.99 lakh in May but fell below the 1 lakh mark in August for the first time in 19 months, sparking hope among industry participants that the worst was over and that the quantum of folio closures was beginning to bottom out. However, folio closures numbering over 5 lakh in September put paid to these hopes. The last three months of CY13 were the worst quarter of the calendar year, with 12.78 lakh folios getting extinguished. The benchmark BSE Sensex rose about 9% in the last quarter of CY13.

At the end of March 2014, equity folios accounted for about 73.7% of the industry’s total of 3.95 crore investor folios. This had stood at 86.2% at the end of March 2008. Assets under management (AUM) of equity schemes stood at Rs 1.65 lakh crore, comprising 20% of industry’s overall AUM of Rs 8.25 lakh crore.

Folio closures is not the only trend the mutual fund industry has to worry about. Despite seven months of inflows, net outflows during FY14 in equity schemes amounted to Rs 7,627 crore. This compares with outflows of Rs 12,931 crore in FY13.

Equity folio closures have been a regular feature every year since FY10. The financial years from FY05 to FY09 had seen net creation of folios, with FY08 seeing about 34,000 folios created per day, the most in a financial year. More than 1 crore equity folios have closed in the last four-and-a-half years.

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