Equity MF investors stay invested in choppy markets

Notwithstanding market volatility, over 60 per cent of retail investors stayed invested in equity mutual funds (MFs) for more than two years, as per the data from the Association of Mutual Funds in India (Amfi).

It is more out of compulsion rather than choice that most equity MFs remained in the red during the two-year period (till October 25) with diversified funds declining by 4.6 percent, analysts have said.

Only funds that invest in defensive pharmaceuticals and FMCG sectors managed to post decent gains even as the Sensex and Nifty indices dropped 3.8 and 3.3 percent respectively during the period.

Of the Rs 1.4 lakh crore retail investments in equity-oriented schemes, investments to the tune of Rs 85,000 crore continued for over 24 months, the Amfi data showed. This is based on the age-wise analysis of assets under management (AUM) across investor types and categories done by Amfi for the six months ending September 2012.

However, high net-worth individuals (HNIs) or those with investments of over Rs 5 lakh redeemed 60 per cent of their portfolio in less than two years. MFs, however, lost over 16 lakh folios, a 3.5 per cent drop in six months.

Folios or investor accounts with MFs stood at 4.48 crore at the end of September. “Most of the decline was seen in retail folios, especially in the equity category, as these were impacted by volatile market sentiments,” sector observers said.

Corporates continued to see an increase in their assets under management (AUM). Their share, which stood at 43 per cent in March, increased to 46 per cent in September, while they had a 60 per cent share in the AUM of debt-oriented funds, data compiled by ratings agency CRISIL showed. They were followed by HNIs who had 25 per cent share and retail investors who had 23 per cent share.

Retail investors increased their investments in debt-oriented mutual funds (including gilt and liquid funds) with the number of retail folios rising by 10.5 per cent in the past six months.

“This can be attributed to investors looking at relatively safer investment options after the volatility in the domestic equity markets in 2011,” analysts tracking the sector said. “This is also a good sign of penetration of debt mutual funds among retail investors.”

Most equity MFs remained in the red during the two-year period (till October 25) with diversified funds declining by 4.6 per cent.

Of the Rs 1.4 lakh crore retail investments in equity-oriented schemes, investments to the tune of Rs 85,000 crore continued for over 24 months
HNIs or those with investments of over Rs 5 lakh redeemed 60 percent of their portfolio in less than two years.