MFs lose 3.5 lakh equity folios in Jan

While the number of equity folio closures are not as dismal as in December, which saw more than 6 lakh folio closures, it is still a cause for concern as long-term investors seem to be using the market rally as an opportunity to exit after booking profits or cutting their losses.

As of January, equity folios accounted for 77% of the industry’s total of 4.32 crore investor folios. The benchmark BSE Sensex gained about 2.4% in January, crossing the 20,000-mark for the first time in nearly two years.

“A lot of the old folios that were created during the 2007-08 period are finally breaking even since the market has picked up. Some of these investors may have exited or shifted to asset classes such as debt and gold,” said Sarath Sarma, executive director, IDBI Asset Management.

Sustained equity folio closures is not the only evil the industry has been grappling with in the past few months. Equity MF schemes have seen outflows for the last eight months, with January seeing outflows of R2,501 crore. What's more, mutual fund managers have net sold shares worth more than R19,000 crore between July and January, according to Sebi data.

While folio closures have accelerated since August last year, industry officials are seeing the brighter side

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