The mutual fund industry has lost nearly 19 lakh equity folios in the first half of CY13, about 20% more than the same period last year.
Remarkably, equity folio closures have accelerated in months when the stock market registered significant gains. For instance, Sensex?s rise of 1.3% in May coincided with the closure of nearly 7 lakh equity folios, the highest monthly closure for the industry. January witnessed a closure of 3.5 lakh folios, a month in which the Sensex gained 2.4% and crossed the 20,000-mark for the first time in nearly two years.
Sustained equity folio closures have also been accompanied by outflows from equity schemes. Equity MF schemes saw outflows of R4,168 crore in the first half of CY13 compared with outflows of R3,467 crore seen in the same period last year. Here, too, May (R2,910 crore) and January (R2,501 crore) registered the maximum outflows.
Market watchers feel sustained equity folio closures are a worrying sign as equity assets are a lot stickier than debt assets and can generate higher revenues. Fund managers have been advising investors to continue their SIP portfolios even in tough times, but long-term investors who entered the market in 2007 and early 2008 have been particularly keen on exiting during market upmoves.
Reassuringly, the quantum of folio closures eased somewhat to a little over 1.1 lakh in June, the lowest closure number registered in the last 17 months. What?s more, the month also saw moderate inflows of R 937 crore into equity schemes, the highest inflows in the last 21 months. The BSE Sensex fell 1.8% in June.
The industry remains cautious. ?We have seen an increase in the number of retail applications through SIP in the past two months. However, interest from high networth individuals in the equity segment is yet to pick up,? said Debasish Mallick, MD & CEO, IDBI Asset Management. Jimmy Patel, CEO of Quantum MF, cautioned that positive data for a month doesn?t necessarily indicate that investors are coming back for good.