Amid a strong rally in the stock markets, retail investors
cashed out from equity mutual fund (MF) schemes, as net outflow in September
rose to a two-year high.
In September 2010, equity MFs had seen outflows of a
whopping Rs 7,281 crore.
During the market rally last month, fund houses recorded
heavy selling, as equity schemes, including equity-linked saving schemes, saw a
net outflow of Rs 3,559 crore, the most in the last 24 months. This essentially
means the inflow of funds into equity assets was much lower than what was
redeemed. In absolute terms, the segment saw redemption requests for equities
worth Rs 6,741 crore, against fresh investments of a mere Rs 3,182 crore.
Industry executives said investors were booking profits in
every rally. Primarily, these investors were the ones stuck in the market for
about a year, they added. This is evident from the fact that in September,
equity fund managers remained net sellers — selling about Rs 3,200 crore due to
continuous redemption requests.
In September, benchmark indices rose about eight per cent.
The BSE Sensex gained about 1,300 points, inching towards the 19,000 mark.
“The major part of the redemption pressure came in the
latter half of the month, and this contributed to preventing active participation
of fund managers in the rising markets,” said an industry chief executive.
As about 90 per cent of equity assets are accounted for by
retail and high net worth individuals, what is worrying is the fact that retail
money is going out. Folios are being closed rapidly, and systematic investment
plans are being terminated.
“The cost of acquisition of retail clients is high. When
such customers move out before their investment tenure, it obviously impacts
the fund industry. But at the end of the day, we cannot cry foul over it, as
ultimately, it is the investor’s money and he booked profits, which is good for
him,” said the chief executive of one the top five fund houses.
So far this year, more than two million retail equity folios
have been closed. In August, 4,60,000 equity folios were closed. Mutual fund
executives say folio closures could be higher in September. The Securities and
Exchange Board of India is scheduled to release its folio statistics later this
month.
The liquid and money market segment recorded Rs 48,445 crore
of net outflow, while income funds saw lower outflow at Rs 256 crore. Overall,
the net outflow from the mutual fund industry in September stood at Rs 51,908
crore.
Source: http://www.business-standard.com/india/news/equity-mfs-net-outflow-at-2-year-high/488942/
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