Equity mutual fund folio closures accelerate in December

The industry saw more than 36 lakh folios dip in equity mutual funds while debt funds added 7.31 lakh folios from April 2012 to December 2012.

More than six lakh folios were closed in the equity mutual funds category in December as investors continued to book profits. From April to November 2012, more than 30 lakh folios have closed. An analysis of the latest SEBI data shows that the number of closed equity fund folios is more than 36 lakh, with six lakh folios closing in December. A point to note is that 36 lakh folios doesn’t equate to 36 lakh individual investors exiting the industry as many investors hold multiple folios across AMCs.

Equity mutual fund investors pulled out Rs 12502 crore as the Indian markets went up 12% during from April to December 2012. ELSS category lost 6.98 lakh folios while equity funds lost the maximum 29.70 lakh folios.

Industry watchers attribute the fall in folios due to consolidation and redemptions. The merger of Fidelity with L&T also resulted in folio consolidation. Barring May, AMFI data shows that there have been continuous redemptions from equity funds since April 2012. The industry recorded the highest redemptions in August (Rs 2096 crore net outflow) and September (Rs 3306 crore net outflow) from equity funds.

“Clients have not made money in the last four years. Now that their portfolios have made some gains they are exiting. Investors are comfortable with debt funds even if it earns lesser returns” says Ladder 7 Financial Advisories.

Only debt funds and ETFs recorded positive net inflows last year. Debt funds added more than seven lakh folios and registered net inflows of Rs 1.31 lakh crore. The industry’s total assets went up to Rs 7.94 lakh crore from Rs 6.60 lakh crore primarily due to inflows in debt funds (Rs 1.31 lakh crore net inflows) and valuation gains in equity funds due to an uptick in markets.

“MIPs delivered good returns in 2012 as compared to 2011 but the assets in MIP fell in 2012 which suggests that investors missed out an opportunity to participate in hybrid funds. Inflows in Gold ETFs moderated in 2012 as compared to 2011. But the overall trend of inflows in gold remained positive. Assets in short term bond funds shot up in the second half of 2012. In the debt category, income funds and dynamic funds received good inflows,” Dhruva Raj Chatterjee, Senior Research Analyst, Morningstar India.

Gold ETFs added 90803 folios while other ETFs saw 12054 folio additions.

Gilt funds attracted Rs 2551 crore net inflows from April to December 2012. Balanced funds lost Rs 119 crore while ETFs attracted Rs 1350 crore. Fund of funds investing overseas saw net outflows of Rs 372 crore.

Net inflows and folios as on December 2012