Retail investors now eye debt, shun equity schemes

Retail investors now eye debt, shun equity schemes

After exiting from equity schemes between October 2012 to March 2013 by taking advantage of the rally in stock markets, retail investors are now preferring to invest in debt funds, especially long-term, given the continuing downtrend in markets induced by heavy selling by foreign institutional investors.

However, it is only at a nascent stage, said MD & CEO of IDBI Mutual Fund, Debasish Mallick. “We have collected about Rs 400 crore from high networth individuals, institutions and few retail investors in duration (long-term) debt funds in June till now, up from Rs 200 crore last month. We do not have specific statistics on the increase attributable to retail investors, but the trend is certainly catching on,” he said. Confirming the trend, the Head of Fixed Income Group at Axis Mutual Fund, R Sivakumar said, “Over the last few months, there has been an increase among retail investors in debt funds in the hope of better returns. For the month of June, we have collected Rs 250 crore till last Friday, up from Rs 63 crore last month.”

Retail investors are redeeming their investments in equity schemes, according to the Director and Chief Executive Officer of LIC Nomura Mutual Fund, Nilesh Sathe. “In June till last Friday, we have seen about 100 redemptions a day.”

President of Karnataka Association of Mutual Fund Advisors, K V Kannan said that advisors are of late promoting debt funds in a big way as well and added, “The equity segment for retail investors is stagnant.”

The trend of retail investors redeeming their investments was evident during the October 2012 to March 2013 period when the number of retail folios dropped by almost 23.50 lakh, or 6.72 per cent, according to the Association of Mutual Funds in India. The segment accounted for about 98 per cent of all folios in equity schemes and 68 per cent of assets under management as on March 31, 2013. Net outflows from equity schemes rose sharply to Rs 2,910 crore in May, up from Rs 80 crore in April.

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