It has been a tough fiscal for the mutual fund industry, particularly with respect to attracting investment into equity schemes. Equity outflows for FY13 are the highest in the last of the six financial years, a worrisome trend for the industry.
In FY13, outflows in equity schemes totalled R13,445 crore till February, surpassing the previous highest outflows of R13,405 crore posted in FY11. In FY12, equity schemes had seen modest inflows of R264 crore. The outflows for the overall equity category in FY13 are even higher ? at R15,326 crore ? if figures for ELSSs are included. In FY13, ELSSs have seen outflows of R1,881 crore, the highest in the past six years.
Equity MF schemes have seen outflows for nine consecutive months now between June 2012 and February 2013, totalling R13,496 crore, data collated from mutual fund industry body Amfi show.
The highest monthly outflows in FY13 was posted in September last year (of R3,306 crore). Other months that saw significant outflows include August (R2,096 crore), October (R1,725 crore) and January (R2,501 crore).
Interestingly, outflows have been high despite the significant run-up in the market between September and December last year. According to experts, several investors used the rally during this period to cut losses or book small profits and exit the market. Indian equities gained over 25% in CY12 and rose over 11% between September and December.
?Several investors who had entered the market in 2008 chose to exit as the market rallied to new highs late last year,? said Dhruva Chatterji, senior research analyst, Morningstar India. ?The gross sales numbers of equity schemes have improved a bit lately, but it has not been sufficient to take care of the redemption,? he added.
Experts also pointed out that the volalility in the market compelled equity investors to look at debt products, which have given average category returns of about 9% for much of FY13. Anticipating a cut in interest rates, investors flocked to long-duration bond funds, which benefit when interest rates fall. Unsurprisingly, equity assets as a percentage of overall mutual fund assets have fallen 10% to 21% at the end of February this year from 31% in March 2012.
Experts acknowledge that sustained outflows in equity schemes are a cause of concern. ?The trend is worrisome, but the good news is that investors have matured and are investing in funds with a good long-term track record,? said Chatterji. He said equity schemes are unlikely to see inflows unless the equity market sees a sustained rally. ?Just a relief rally won’t be enough to reverse the current trend,? he said.