The retail AUM which continues to remain invested for more than two years has gone up to Rs.1.10 lakh crore as on September 2014 from Rs.71,661 crore in September 2013, shows AMFI data.
Unlike in 2013, when investors rushed to book profits after a rally in the market, this time around investors seem to be hang in. An analysis of age wise analysis of retail AUM shows that Rs.1.10 lakh crore remained invested in equity mutual funds for more than two years as on September 2014. As on September 2013, Rs. 71,661 crore retail money stayed invested for more than two years. This is a 50% increase in the amount of money which remained invested for more than two years.
In September 2014, of the Rs. 1.71 lakh crore AUM, 64% or Rs. 1.10 lakh crore remained invested for more than two years. In September 2013, of the Rs. 1.06 lakh crore AUM, or 63% Rs. 71,661 crore remained invested for more than two years, shows AMFI data.
Financial advisors say that there could be two reasons behind the increase in retail stickiness.
Firstly, the markets have rallied and there is a possibility that this is being reflected in the overall increase in retail AUM which remained invested for more than two years. Secondly, they say that retail investors are hoping that the markets will go up further from here and are thus keen to keep invested to participate in the rally.
DP Singh, Chief Marketing Officer – Domestic Market, SBI Mutual Fund attributed this to good performance of equity mutual funds. “Many retail investors who had put money in 2012 have witnessed good performance of equity mutual funds. This has helped industry to regain their faith.”
Hemant Rustagi of Wiseinvest Advisors pointed out that retail investors invest through SIP which is long term in nature. “Majority of retail investors invest in equity mutual funds through SIP. These investors keep in mind a certain goal before investing. Hence, they remain invested for long tenure. Also, over a year, investors have seen sustained rally in the equity market. Strong government and improved macro-economic sentiments have also given a fillip to keep up such persistency level.”
“Increase in retail AUM is largely due to market rally. The market has gone up sharply in last one year. However, the rise in retail equity folio count shows that retail investors are putting their money into equity mutual funds,” said Vidya Bala, Head – Mutual Funds Research, FundsIndia.com.
HNIs
The behavior of high net worth individuals (those who invest more than Rs. 5 lakh as per AMFI’s definition) seems to be in contrast to retail investors. Age wise analysis of investment in equity funds (for more than two years) shows that the HNI AUM declined to Rs. 27,522 crore in September 2014 as compared to Rs. 29,828 crore in September 2013. Experts say that HNIs normally take tactical calls and are quick to book profits. As compared to retail, they usually have a near to short term view.
“Typically, HNIs redeem their investment after their portfolio hits a pre-determined target. After booking profits, such investors put their money in less risky instruments like debt funds,” said Rustagi.
“HNI investors frequently rebalance their portfolio. Any hike in market give them an opportunity to book profits,” says Singh.
The rising interest towards equities is evident by Rs. 39,217 crore net inflows in equity funds YTD till September 2014, shows AMFI data.
