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Retail investors share in debt assets has been rising steadily over the last three years.

Uncertain domestic macro-economic situation which is weighing on equity markets is leading more investors to move towards debt schemes. Fund houses too are actively promoting debt funds as interest in equity funds remains lacklustre.

The industry has seen a whopping 86% spike in debt folios over the last four years. In 2008, there were 29.89 lakh debt folios, which have gone up to 55.63 lakh folios in June 2012. As on March 2012, retail investors share in debt folios stood at 89% which was 83% in 2009.

As per the latest SEBI data, debt funds have seen a 6% rise in folios over the last four months. There were 52.50 lakh folios in debt category as on March 2012, which has increased to 55.63 lakh folios in July 2012, an increase of 3.13 lakh folios. This was due to the robust sales in income funds, particular FMPs.  As per AMFI data, income funds launched in July collected Rs 2417 crore while net inflows stood at Rs 21,670 crore, the highest in the last 15 months.

With the exception of gilt schemes, all other categories of debt funds like FMPs and liquid funds have seen an increase in folios. Liquid funds saw a marginal rise of 4501 folios in the last four months.

Rising retail interest

Retail share in debt assets is rising steadily since 2009. Out of the approximately Rs 6 lakh crore managed by the industry as on March 2012, 76% (Rs 4.53 lakh crore) of the assets were held in debt funds. Out of this, in value terms, retail investors constituted 5%, up from 2% in 2009

Fund officials say that the relatively slow growth in retail debt assets is due of the inadequate understanding of debt funds among retail clients. “Fund houses have to take this concept to the people at large. Lately the retail investor’s participation in liquid and FMPs has been increasing. Also, in the last few months, AMCs are promoting their debt funds in a big way. Debt funds will gain popularity going ahead as they can beat fixed deposit returns. There is a huge market to be tapped,” says a sales head of a large fund house. Fund officials say that one year FMPs are very popular among retail clients. 

Most fund houses are pushing their debt funds among retail investors because retail assets are sticky. As per AMFI data, Rs 9042 crore retail money stayed in the non-equity category for more than two years in the industry. 

Equity funds, on the other hand, are continuing to lose folios. There were 3.92 crore folios in equity funds in March 2011 which has plunged to 3.76 crore in March 2012 and further down to 3.65 crore folios in July 2012. Fund officials have attributed a variety of reasons for this - from scheme mergers, slump in new fund launches, to SIP closures. 

Retail debt folios