Equity MF schemes begin 2014 on a positive note

Equity MF schemes begin 2014 on  a positive note

Equity mutual funds have begun calendar 2014 on a positive note in terms of net inflows but are still not out of the woods as their investor base continues to decline.

Going by the latest statistics of industry body Association of Mutual Funds in India (Amfi), the equity segment saw net inflows of Rs 427 crore in January, which meant that for the third month in a row, the equity segment of MF witnessed net inflows.
Inflows remained in positive territory despite markets remaining weak throughout the month, with fear of tapering hitting sentiments.

Earlier, this sector had got Rs 699 crore and Rs 857 crore in the months of November and December, respectively. Even as it continues to give relief to sector officials, the positive flows are declining month by month — which is a worrisome factor for the industry.

Further, sales of equity schemes which recently reached over Rs 5,500 crore are down once again to Rs 4,558 crore, which is not encouraging.

On top of this, the sector has failed to arrest the decline in folio numbers in equity schemes. According to Securities and Exchange Board of India (Sebi), January saw erosion in the equity investor base with overall equity folios declining by 2.21 lakh during the month. Although, this is the lowest decline in five months, it is still beyond the sector’s comfort zone.

In August last year, the industry could bring the folio closures to below the 1 lakh mark to as low as 62,000. But the situation worsened further in the ensuing months with over a million folio closures in two successive months.

As on January 31, 2014, the MF industry had an overall equity investor base of 2.96 crore, which is way below what it had during 2009-10.

Also, industry insiders point out that penetration beyond the top 15 cities continues to remain a tough task.

Recently, Finance Minister P Chidambaram reportedly urged fund houses to focus on other cities where there is potential. As of now, over 87 per cent of assets continue to come in from the top 15 cities, while the contribution of the rest remains unsatisfactory.

Investor education campaigns by the industry are now in top gear. As per Amfi initiatives, fund houses are voluntarily adopting districts to spread financial literacy. However, despite all these attempts, equity schemes continue to struggle to attract investors.

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