MF investors book profits early

In what can be seen as a sign of financial maturity, retail mutual fund (MF) investors are exiting from their investments, especially in equity funds, after booking profits, instead of resorting to panic-selling after entering at high prices, according to an MF advisor in Karnataka.

“The trend augurs well for such investors, as it strengthens their confidence in the stock markets to make money,” the President of Karnataka Association of Mutual Fund Advisors (KAMFA) K V Kannan said. He added that those who invested in equity funds through the systematic investment plan (SIPs) over a period of 24 months made “good” returns and redeemed their units at least partly, riding the stock market rally that lifted the BSE benchmark Sensex 14.4 per cent on a  year-on-year basis as on October 1, 2012.

Information gleaned from an MF website - NAV India - revealed that over a 12-month time horizon ending September 28, 2012, diversified schemes outperformed
Sensex. The top five diversified schemes delivered a return ranging from a maximum of 24 per cent and 22.3 per cent.

Retail MF investors, including high networth individuals of Karnataka held units worth about Rs 13,500 crore as of August 31, 2012, which in industry parlance, is referred to as assets under management (AUMs).

The AUMs, inclusive of institutional investors stood at about Rs 43,500 crore for Karnataka. Bangalore accounts for about 80 per cent of these AUMs. Kannan said that in equity-linked savings schemes (ELSSs) that negate investors the opportunity to exit at profit during the three-year lock-in period, is a dampener for investors, notwithstanding the income tax benefits from investing in ELSSs.

It is pertinent here to note that the top five schemes delivered returns ranging from 19.5 per cent to 21.3 per cent over a 12-month period as on September 28, 2012.

The net inflow of investments into MFs from all categories in August 2012 was Rs 19,807 crore, compared to a net outflow of Rs 14,597 crore in August 2011, according to data available with the Association of Mutual Funds of India. The total AUMs as on August 31, 2012 of 44 MFs was Rs 7. 52 lakh crore.