| Book profits in buoyant market; concern for fund houses, say analysts. |
The mutual fund industry suffered a 5.8 lakh reduction in folios this September as investors closed accounts to book profits in a buoyant market.
The total number of folios (fund accounts) in the industry fell from 4.77 crore to 4.71 crore in September, a depletion of 1.2 per cent, according to data on the Web site of the Association of Mutual Funds in India.
The decrease in the folio numbers is certainly a matter of concern for the AMCs, agreed analysts. “Mutual funds are meant for small investors and, if they are dropping out, then that needs to be addressed. However, this can be seen as the peak of the decline. It looks unlikely that this decline will go on forever,”said Mr Dhirendra Kumar, CEO, Value Research.
The average ticket size of folios, however, went up to Rs 1.51 lakh in September from Rs 1.44 lakh in August, as assets rose in line with stock gains.
Total count
The total number of folios in the industry as at April end was 4.78 crore. Folio numbers rose to touch 4.79 crore in June. However, post-June, the industry saw a drop in folios month after month. July saw a decline of 1.6 lakh folios, and August 49,723. The biggest drop of 5.8 lakh folios was recorded in September.
“Primarily, these redemptions are because the stock market levels have consolidated at a high range, to 2007 levels. So you have a lot of investors leaving the market. Secondly, the distribution channels are taking a while to adjust and settle down to the new game-changing regulations which is further affecting folio numbers,” said Mr. Arindam Ghosh, CEO, Mirae Asset Global Investments (India).
Top fund houses
Of the top five fund houses in the country, only HDFC Asset Management Company (AMC) has seen an increase of 40,999 in folio numbers in September to around 41 lakh folios. The other four fund houses saw a drop — Birla Sun Life Asset Management by 33,598 to 24 lakh; ICICI Prudential Asset Management Company by 37,224 to 28 lakh; UTI Asset Management Company by 64,464 to 99 lakh, and Reliance Capital Asset Management by 79,442 to 72 lakh.
These AMCs, during the same period, experienced an increase in their assets. The possibility that there has been a consolidation of folios leading to the decline in their numbers was ruled out by analysts.
“There is no question of consolidation leading to a drop in folios here. Investors who had come into the market in 2007 are exiting it for profit-booking leading to such high redemptions,” explained Mr Dhirendra Kumar. “The reason for an increase in the AUMs is the increased liquidity in the system and is independent of the folio numbers,” added Mr. Ghosh.
However, investors can't stay away from the equity markets for long, said analysts. “With inflation currently at 16 per cent, investors will have to come back to equity funds to beat it and get higher returns on their investments. No debt or fixed income fund will give any investor returns of 16 per cent or more. And the best way for investors to come back to the markets is through the Monthly Income Plans,” explained Mr Jaideep Bhattacharya, Chief Marketing Officer, UTI Asset Management Company.
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