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MF investors remain invested for long term

Investors remained invested for a long period as current the market sentiment is weak and they are not tempted to book profit

June 21, 2012 4:44 IST | India Infoline News Service
The volatility in stock market has forced mutual fund retail investors to stay invested for the long term. According to the Confederation of Indian Industry (CII) and PricewaterhouseCoopers’s (PwC) mutual fund report (June 2012), volatile market conditions in the last two years have led to net withdrawals by investors of Rs. 220.23 billion in FY11-12 compared to Rs. 494.06 billion in FY10-11.

Retail investors' share—in asset under management (AUM) of equity schemes with maturity of more than two years—has increased 62% at the end of March 2012 from 46% at the end of March 2009.

The Association of Mutual Funds in India (AMFI) data indicated that the AUM of equity schemes in retail category having maturity of more than two years rose to Rs. 825.77 billion at the end of March 2012 from Rs. 351.52 billion in March 2009.

The mutual fund industry body said that, retail investors have remained invested for a long period as current the market sentiment is weak and hence they are not tempted to book profit.

Amar Ranu, senior manager-research & advisory (third party products), Motilal Oswal Wealth Management said, “Retail investors have remained invested for a long period due their increased interest in equity. They have been investing into equity mutual funds through SIPs (systematic investment plans). Typically any SIP investment by retail investors runs for more than two years. Hence, we have seen this significant growth.”
 
Stock market was bullish from 2005 to the start of 2008. The BSE benchmark Sensex gained around 42% in 2005, 46% in 2006 and 47% in 2007. But since 2008 onwards stock market is volatile giving less opportunity to investors to exit.

The CII-PwC June report highlighted that the Sensex and AUM for the mutual fund industry have risen in tandem. Booming markets in 2006 saw increased investor participation in the industry, leading to fund inflows enabling the AUM to grow at a pace greater than the Sensex.
 

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