Equity fund folio closure slows down in November

There have been a series of equity fund launches in November which helped industry add new folios.

Mutual fund industry lost 3.82 lakh equity folios in November due to profit booking and launch of tax- free bonds. However the silver lining was the fact that the pace of equity folio closure slowed down in November due to a series of new fund launches. The industry had seen erosion of five lakh folios from equity funds in October.

There have been a series of close end equity fund launches in November. Axis, ICICI Prudential, Reliance have collectively added close to one lakh folios in their close end funds.

Despite distributors and AMCs efforts to educate investors to remain invested and continue their SIPs, the trend of equity fund closure continues, albeit at a slower pace. The industry saw net outflows of Rs. 9199 crore from April - November from equity funds. The continuous decline in folios of equity funds has been a cause for concern for the industry for some time now. Equity funds have lost more than 25 lakh folios from April to October 2013. From April to November, the total erosion of equity fund folios has reached 29 lakh.

Debasish Mallick, CEO, IDBI MF observes that people tend to redeem their investment whenever market goes up. “Since market prospect doesn’t look bright, investors are exiting from equity funds whenever they saw any correction in indices. Also, institutional investors are staying away from equity funds due to volatility. ”

Hemant Rustagi of Wiseinvest believes that many investors who haven’t seen their money grow over the past few years have started exiting equity market after booking some profits. Also, some portion of equity funds has shifted to tax-free bonds as such bonds offer attractive yields.

The S&P BSE Sensex was hovering around 21000 level in October-November 2013. The broader index touched a peak of 21,239 points on November 3, 2013. It fell by 2% or 373 points in November.

Baring debt funds which added 61, 535 folios till November 2013, all other categories saw a major decline in number of folios. Debt funds have seen net inflows of Rs. 1.63 lakh crore till November 2013. In October, the industry added 39692 folios in debt funds.

Source: SEBI