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Mutual funds lose 4.6 lakh equity folio in August

Chandan Kishore Kant / Mumbai 12 Sep 12 | 05:47 PM

A day after industry body Association of Mutual Funds in India (Amfi) in its latest monthly data showed higher redemptions from equity schemes at Rs 2,300 crore, statistics released by the capital markets regulator Securities and Exchange Board of India is more damaging for the ailing fund industry.

In August, in one of the sharpest declines in number of equity folios, industry lost 4.6 lakh equity folios (including those of equity linked saving schemes or ELSS). This took the overall number of equity folio closures in current calendar year to a massive 2.36 million - an unseen figure for the country's fund houses in a span of 8 months.

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For a under-penetrated industry, such large closures is, in fact, a big cause of concern. Amid this, industry's executives continue to remain clueless of how to prevent their clients from exiting mutual fund investments.

Month Equity folio closure
Jan 95,648
Feb 5,14,433
Mar 2,38,706
Apr 2,99,899
May 1,86,961
Jun 2,34,907
Jul 3,27,558
Aug 4,61,840
* Includes ELSS. Source : Securities and Exchange Board of India

They maintain that they are making all possible efforts, from investor education programmes to one-on-one interactions with clients; but somehow all attempts are proving not fruitful.

According to chief executives consistent record of poor performance of equity investments over the last few years and other avenues looking more attractive in terms of return are more than enough to keep investors at bay.

"They are investing in real estate and gold. Moreover, high interests on banking products, be it fixed deposits or recurring deposits, are being preferred by investors. And this will continue till equity markets rally and deposit rates decline below 8 per cent," says chief executive officer of a mid-sized fund house.

Meanwhile, industry's overall folios across the category of schemes stood at 4.53 crore in August against 4.57 crore last month.

Debt funds continued to see more traction. But in comparison to the losses in equity category, the fresh addition in debt schemes was only 10,000. Interestingly, gold exchange traded funds witnessed a decline in investors' base as it declined around 6,000.

During the month, fund categories including balanced, gilt and other exchange-traded funds saw net outflows. Liquid and money market schemes continued to pull in more fresh inflows at Rs 14,775 crore while income funds saw net inflows of Rs 7,548 crore in August. According to Amfi, industry's overall net assets under management as on 31 August stood at Rs 7,52,548 crore against Rs 7,30,361 crore as on 31 July.

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