Reflective of the acceptance of mutual funds as a long-term investment avenue, 58% of the individual investor assets in equities has been held for over 1 year, shows that latest AMFI data.
Earlier, long-term capital gains on equities attracted no tax. However, despite the finance ministry re-introducing LTCG, individual investor assets show no signs of early redemption. This indicates investor maturity, which is reflected in strong SIP flows despite market volatility and long holding period in spite of lower tax benefit. In fact, 33% of individual equity assets has been held for over two years.
Even in debt funds, individuals continue to hold their assets longer. Surprisingly, debt funds are held longer than equity. That is 35% of debt assets is held for over 2 years compared to 33% of equity assets. This could be due to long-term capital gains benefit on debt. Investors can get indexation benefits only if they stay put for over 3 years.
Individual investors include both HNI and retail investors.
Institutional assets meanwhile are characterized by shorter holding periods. Only 37% of equity and 30% of debt assets of institutional investors are held for a period greater than a year. On a positive note, only 7% of institutional assets in equity funds is held for a period lower than a month. Majority of the institutional money in equities (37%) is redeemed between 3 to 6 months while majority of the institutional debt assets (29%) is invested for a period lower than a month. This is in line with corporate trend of investing for short term in liquid funds.
Institutional investors include both domestic and foreign institutional investors.
Overall, there has been a slight growth in holding period numbers in December 2018 compared to September. 29.7% of the industry’s equity assets have been held for over two years compared to 28.4% in the previous quarter. Debt meanwhile sees higher allocation in the 6 to 12 month bucket owing to higher concentration of corporate investments in this segment.
