Equity folio closures come down in January

Mutual fund industry seems to have managed to arrest the sharp loss of folios or investor accounts in equity funds. The last two months particularly have been better for the industry.

Thanks to fewer redemptions and new fund launches, mutual fund industry recorded a dip in equity folio closures in January, shows the latest SEBI data. Equity funds lost two lakh folios in January as compared to nearly four lakh folio closure in December. This augurs well for the industry as equity funds lost nearly six lakh folios in October.

Due to less redemptions and close end fund launches, equity mutual funds saw net inflows of Rs. 496 crore in January. The gross redemptions from equity funds came down to Rs. 3,755 crore in January compared to Rs. 4,242 crore in December.

There were four equity funds which hit the market in January - IDFC Equity Opportunity Series 2, Reliance Closed Ended Equity Fund - Series B, Sundaram Select Micro Cap Series I and Series II. These funds collectively mopped up Rs. 472 crore.

However, the relief seems to be transitory as the industry is witnessing average gross redemptions of Rs. 4000 crore YTD. Industry officials say that the decline in folio loss is largely due to new fund launches. It may happen that investors choose to invest in a new fund through existing folios but new funds do result in new folios being created.

Barring debt and overseas fund of funds, all other categories of funds recorded dip in folios. AMCs and distributors are increasingly promoting debt funds among retail investors who were traditionally sold equity funds, which are high margin products for AMCs.

The focus is also tending to shift towards diversification beyond Indian markets. Many AMCs have come out with funds which provide exposure to global equities. Thus, the category is seeing marginal growth in folios.   

Equity folios