The mutual fund (MF) industry is currently concentrating more on the existing schemes such as systematic investment plans (SIPs) rather than launching news funds to mobilise resources as they are finding it difficult to convince investors towards the new fund offerings (NFOs) in a bearish market. An inverse fund flow has been witnessed in NFOs and existing schemes in the last three months.
According to the Association of Mutual Funds in India (Amfi), the net inflow into the existing schemes was Rs 13,790 crore in November 2008, which jumped to net Rs 66,803 crore in January 2009. On the contrary, the net inflow to the NFO dipped to merely Rs 37 crore in January from Rs 4,229 crore in November. The number of NFOs also reduced from 21 in November to only five in January during the corresponding period.
Commenting on the fund inflow into the existing schemes and NFO, IDBI Mutual Fund MD Naval Bir Kumar said, ?If an equity linked NFO is launched now, it will be very difficult to convince people for investments. The low flow of money into the NFO makes it difficult to manage it.? ?Therefore, the fund houses are concentrating on existing schemes such as SIPs than launching a new fund,? he said. ?The investors tend to invest into the equity market at the higher level of index and refuse to buy when the market is cheap. The investors do not understand that the risk in equities is significantly less now than it was when the Sensex touched 20,000 points,? added Kumar.
The global meltdown has hit domestic bourses badly in 2008. The BSE Sensex dipped 52% or 10,639 points and NSE Nifty shed 52% or 3,179 points during the corresponding period. Currently, the Sensex is trading above 9,000 points and Nifty above 2,700 points.
This has impacted the Asset Under Management (AUM) of the MF industry. The AUM has dipped by 23% or Rs 1.27 lakh crore during the said period. The AUM of the industry stands at Rs 3.98 lakh crore as on January 2009. Value Research CEO Dhirendra Kumar said, ?There is lot of fear in the minds of investors. The fund houses will not face the pressure to launch new schemes till the fear is not completely wiped out.?
He said several fund houses are coming out to launch new schemes in the market, however, they are unsure how much they can mobilise through the new schemes. Taking a cue from the market sentiment, Sahara Mutual Fund CEO NK Garg said, ?We used to witness around 40-50 schemes being launched every month which has been reduced to merely 8-10 schemes currently.? The investors are staying away from the market due to the uncertainty, he said.
However, some market players feel they have to pull-up their socks to attract the retail investors to again enter in the MF schemes.
?It will be again huge task for the fund houses to draw the investors back after the redemptions pressures we witnessed in MF schemes. Apart from that, it is also seen that investors are positioning their money in the old schemes only where they have a track record,? said a senior fund manager from the leading fund house.