The recent fall in Indian equity markets has prompted retail investors to go for lumpsum investments into equity funds.
According to markets participants, more number of investors have entered equity funds through lumpsum against systematic investment plan (SIPs) in August.
Lumpsum investments went out of favour in the last two years after market regulator Securities and Exchange Board of India (Sebi) imposed ban on entry load (from August 2009). Volatility in equity markets also discouraged investors.
Lesser number of new fund offer (NFO) launches also led to lesser one-time investments. However, industry sources say August saw around R500-1,000 crore of inflows in equity schemes through lumpsum investments.
Dhirendra Kumar, CEO of Valueresearch said, ?In the last two years, investors didn’t get a chance to enter the equity markets as there were sharp movements in the markets.? He added this time investors are entering equity markets through lumpsum investments as markets have corrected the last few weeks. According to latest fund manager survey by ICICI securities, 52% of them felt that the allocation to equity should be increased at current valuations.
?Generally investors invest lumpsum in NFO, but in the last two years there were no major NFOs, which might have also impacted the lumpsum flows,? said Kumar.
While R20,000 crore worth of equity funds have been redeemed in the last two years, industry participants say that they are witnessing some fresh inflows in equity schemes through lumpsum as well as through SIP route in the past few months.
Karan Datta, national sales head at Axis MF says, ? Distributors had slowed down selling funds in the last two years, so one time investment had also come down?. But the positive part remains that investment through SIPs have increased during the period and now constitutes about 30% of total gross flows into equity schemes against over 10%, two years ago, he said.
Market participants partially attribute rise in SIPs and lumpsum investment to regulators move to charge transaction fee from investors. ?It was necessary to incentivise distributors as they were selling other financial products like insurance. However we have to wait for a few more months to look whether new regulation will result in fresh money flowing into the equity schemes on a consistent basis,? said a CEO of the leading fund house.
