The number of small investors who hang on to their investments in equity mutual fund is growing while that of the rich is dwindling. The latest Amfi data show that over 64% of retail investors have remained invested in equity funds for over two years compared to 46.4% in March 2009.
The large redemption from equity schemes seen over the past six months seem to have been mostly by high net worth individuals (HNIs). The share of HNIs who buy with an investment horizon of more than two years has come down by 5% to 43% during the six months ended September.
Says HDFC Mutual Fund MD Milind Barve, ?Much of the equity inflows from retail investors are coming in form of SIPs (systematic investment plans) which has continued despite volatile markets.? Investors who use the SIP route usually stay invested for a longer duration as investments are made in smaller amount, he adds.
According to a Boston Consulting Group report, the percentage of equity inflows through SIPs has gone up from 11% in 2008 to 19% in the first quarter of 2010. Reports say that nearly three lakh SIP equity accounts are being opened every month. However, distributors are concerned that equity folios have fallen sharply over the past few months indicating that investors are exiting the market altogether. This trend, they point out, may have skewed the numbers somewhat.
Bajaj Capital mutual funds national head Surajit Misra says, ?It is possible that some short-term retail investors would have exited, which in turn has increased overall investment horizon for the retail category.?
According to Barve, equity redemptions in recent times have to a large extent been mainly from NFOs (new fund offerings), which attracted large subscriptions during 2007-08. ?They are now booking profits since the NAV is either reaching the par value or is higher? he said.
In September alone, equity schemes saw net outflows of over Rs 7,000 crore while over six lakh folio were redeemed. Apart from retail investors, banks and financial institutions have held on to their investments for more than two years. The share of this category has risen to 71.6% in September from 56% in March.
