Retail investors' holding period in MF equity schemes improves

Those holding up to one year has grown marginally.

Retail investors are taking a longer term view of mutual fund equity schemes than more informed institutional investors.

Data published by the Association of Mutual Funds in India (AMFI) show that the holding period of retail investors in equity schemes is becoming longer than that of high net-worth individuals (HNIs), foreign institutional investors (FIIs), banks or financial institutions and companies.

The numbers released by AMFI on holding periods for March indicates that number of retail investors holding equity mutual funds for more than 24 months has witnessed substantial improvement. Of the total retail investors, 62.5 per cent preferred to hold on to their MF investment for longer period in stark contrast to 46 per cent reported in March 2009.

The change in attitude could be due to two reasons. One, it could be on account of MF agents not advising their clients to churn their portfolio, on account of waning interest due to lower commission payable on new business. Two, those who invested in late 2007 are yet to see substantial appreciation in their investment (in the last 30 months the BSE Sensex has gained just 10 per cent). Similar trend is seen in the holdings of HNIs. The number of HNIs holding equity schemes for more than 24 months has recorded an increase.

Fewer number of retail investors held on to their investments between 12 and 24 months. Only 16 per cent of the retail investors-held their equity assets for this duration. This is 19 percentage lower compared with the corresponding period last year. Similar trend was witnessed in HNIs holdings. Of their total investment, 10 per cent or Rs 4,493 crore was held for 12-24 months against 37.9 per cent or Rs 10,606 crore reported last year.

The number of those holding up to one year period has grown marginally. This low growth is surprising given the steep appreciation in NAV in this period. Twenty-one per cent of the retail investors held on to their investment for a year against 18 per cent in the previous year. 21 per cent of HNIs held on to their investment for this period as opposed to 25 per cent reported last year.

Investor's folio and AUM

In the last one year MF investors closed 7,75,980 folios (accounts), of this retail investors accounted for 6,12,694 folios. According to the March report, retail investors folios stood at 4,02,93,410 compared with 4,09,06,104 folios reported in March 2009.

The number of account closures is unexpected given the market rally, MF equity assets moved up by 82 per cent or Rs 90,298 crore in the past year. For the same corresponding period, BSE Sensex moved up by 80 per cent. Of the change in AUM, retail investment accounted for 69 per cent or Rs 62,286 crore.

Source: http://www.thehindubusinessline.com/2010/06/10/stories/2010061053581200.htm