a 19-month high in December. “Investors seem to have run out of patience. The industry has concentrated on increasing the number of SIPs this year but it has not been able to arrest the quantum of outflows in equity schemes,” said Sarath Sarma, executive director, IDBI Asset Management.
Investors also migrated to debt products. While the early part of the year saw significant inflows into fixed maturity products, dynamic bond funds saw major inflows after March. “Large inflows have come into income funds and duration bond funds,” said Chatterji. Most of the debt funds categories, including liquid funds, ultra short-term income funds and medium and long-term gilt funds, have given average category returns over 9% this year. The assets of a universe of 18 dynamic bond funds have swelled by nearly 400% in past one year, according to Morningstar India.
That explains why the overall assets under management (AUM) of the industry has grown despite outflows in equity schemes. In November, the industry’s month-end AUM stood at Rs 7.93 lakh crore, the highest month-end assets for the industry since April 2010. November’s figures represent a 20% rise over the AUM garnered in January (Rs 6.59 lakh crore) and a 35% rise over the AUM of Rs 5.87 lakh crore posted in March, the lowest in the year.
According to Kumar, exits in equity schemes are unfortunate given that the market still remains fairly priced right now. “We try to educate investors that their investments are more likely to be profitable if they enter the market when things are gloomy rather than when everything is looking up. But investors have a tendency to invest when the markets have already run up substantially and look expensive,” said Kumar.
Market observers, however, believe that equity schemes might see inflows in 2013 if the current rally continues for a few more months. Sarma is hopeful that the focus on increasing SIP numbers may see some results in the coming months.
Interestingly, retail investors are not the only ones to have exited Indian equities this year. Unlike their overseas peers, domestic institutions have sold equities worth