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24 Feb 2011 12:00 AM
MF industry more stable after entry load ban 
A staff writer
 

The mutual fund industry has gained more stability since the ban on entry load, according to a study by Morgan Stanley; Gross inflow in existing equity schemes in 2010 was the highest in the last three years.

Mumbai: The mutual fund industry in India is gaining more stability since the ban on entry load from August 1, 2009 by SEBI, according to a study by Morgan Stanley.

The stability is evident in the falling turnover (gross buying and selling of equity mutual funds) in mutual funds, said the study titled “India Strategy: NFOs Ban(e) or Blessing”.

Despite the entry loan ban, in 2010 the gross inflows in equity funds touched a three-year high. In 2010, gross inflows in existing equity schemes were Rs 68,974 crore compared with Rs 43,500 crore in 2009 and Rs 50,000 crore in 2008.

Over the past three months, equity mutual funds have seen the highest cumulative inflows since August 2009. “This is distinctly surprising in the context of market volatility – usually market volatility causes reticence among mutual fund investors. In our view, we could be at the cusp of a structural shift of significant organic growth in the mutual fund industry in the coming years. The industry’s profit dynamics could also shift sustainable volume driven performance,” the Morgan Stanley study said.

The SEBI ban has not affected the relative position of the mutual fund industry in the equity markets as is apparent from the share of the assets under management in market capitalisation, which remains intact.

The equity AUM of mutual funds as a per cent of market capitalisation too has stablised at 2007 level of 3 per cent.

 
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