MF industry adds close to 55 lakh retail folios last year

92% of the folio growth in MF industry was contributed by retail investors. The latest AMFI data shows that retail folios grew by 54.52 lakh from 3.99 crore in March 2015 to 4.53 crore in March 2016. During the same period, the total industry folios, including all categories of investors, grew from 4.17 crore to 4.76 crore, an addition of 59.22 lakh folios. 

Equity

The healthy growth in retail folios was largely due to addition in growth oriented equity folios. SEBI data shows that growth oriented equity funds, including ELSS, received net inflows of Rs. 74,026 crore last fiscal.  

As a result, equity funds, including balanced and ETFs, added 44.97 lakh folios last fiscal. Equity funds (growth oriented) attracted the largest folios (40.27 lakh), followed by balanced funds (4.33 lakh) and ETFs (36,396).

Balanced funds have gained traction after the changes in tax structure of debt funds. This is evident by the growth in assets in this category. Retail assets in balanced funds grew by Rs. 3,672 crore, from Rs. 11,221 crore in March 2015 to Rs. 14,893 crore in March 2016.

The three categories which saw a depletion in retail folios were overseas fund of funds, Gold ETFs and gilt funds.

Gilt

Gilt funds, which invest in government securities saw a marginal (575) dip in retail folios. Vidya Bala, Head – Mutual Fund, FundsIndia.com, pointed out that yields from government bonds have hardened in the last two quarters due to which the category has not performed well.

Gold

While the gold prices have bounced back recently, the past underperformance made retail investors flee gold ETFs, which saw a depletion of 40,200 folios last fiscal. Distributors say that the category is expected to see renewed interest due to the recent uptick in gold prices. Value Research data shows that Gold ETFs have delivered 13% return over a one year period.

Overseas fund of funds

Overseas fund of funds category is seeing continuous erosion in folios due to the lackluster performance. Value Research data shows that the category has delivered -5% return over a one year period. However, if you look at the past three months returns, this category has delivered the highest 15% absolute return, beating all other categories. This is largely due to good performance by commodities and emerging markets funds.

Renu Pothen, Head – Research, iFAST Financial India says that investors should have a small allocation to international funds not just for geograpical divesification but also to avoid concentration risk arising out of too much exposure to domestic equities. 

Growth in retail folios