Mutual funds lose 4% retail folios in H2FY14: CRISIL

India Infoline News Service | Mumbai |

The equity category saw the maximum decline in the number of retail folios as investors chose to book profit

Mutual funds lost 4% or 16 lakh retail folios over the past six months ended March 2014, marking the sixth consecutive half yearly decline, according to the data released by the Association of Mutual Funds in India. Overall, at the end of H2FY14, the industry had 3.95 cr folios (including institutional and high net worth individuals’ folios) compared with 4.13 cr folios held at end of H1FY14.
Retail investors continue to exit equity mutual funds
The equity category saw the maximum decline in the number of retail folios as investors chose to book profit after the recent steep rise in the segment and on expectations of volatility ahead. The equity market benchmark CNX Nifty gained 17% in the past six months ended March 2014, helped by positive domestic and global cues. 
HNIs too turn away from equity
After rising almost three times in H1FY14, the  number of folios held by high net worth individuals or HNIs (individuals investing Rs 5 lakh or more) declined by 5% (or 1.5 lakh) in the second half of FY14 as the segment chose to book profit. The equity and balanced fund categories together lost nearly 1.8 lakh folios but the overall decline in the segment was offset by an increase in the number of folios in the debt oriented and liquid/money market funds. 
Gold ETFs become unattractive
Gold exchange traded funds posted their second consecutive half yearly decline in overall folio count. Retail folio count in the category fell by nearly 7% to 4.89 lakh in the period under review compared with a 5% decline in the preceding six months. Volatility in the underlying asset class prompted investors to exit the category. Domestic gold prices (represented by the CRISIL Gold index) fell by over 6% in the past one year ended March 2014.
Gilt funds saw highest decline in folios since March 2010
Gilt funds went out of flavour and the category witnessed 10% decline in overall folio count – the highest since March 2010 – due to on-going uncertainty in interest rate environment amid persistent high inflation. Gilt funds generally benefit in a falling interest rate scenario as bond prices (NAVs) and interest rates are inversely correlated.
Debt funds continue to see rise in the number of retail folios
Debt funds have been seeing a rise in investor accounts since March 2009 and H2FY14 was no different. Debt funds added 2.91 lakh retail folios over the past six months, highest since September 2012; they had added 1.79 lakh folios in the six months ended September 2013.
Retail equity AUM invested for over two years dips to 62%
Tenure-wise analysis of assets under management (AUM) across investor types and categories for the half year ended March 2014 showed that 62% of retail AUM stayed in equity mutual funds for more than two years, lower than 68% seen in the preceding six months. Out of the Rs 1.22 lakh cr of retail investment in equity-oriented mutual funds, Rs 75,403 cr of investment was held for over 24 months. About 51% of HNIs by AUM stayed invested in equity mutual funds for more than two years.
Corporates continue to dominate mutual fund AUM
Corporates continued to dominate mutual fund AUM; they enjoyed 49% share in March 2014 (see table 4), same as in September 2013. HNIs were the second biggest contributor with 29% share followed by retail investors with 19%. 
Investor-wise composition of number of folios (in lakh)
 
Investor Classification Mar 2014 Sep 2013 Absolute Change % Change
Retail 363.21 379.33 -16.13 -4.25
High Networth Individuals* 28.57 30.12 -1.54 -5.13
Corporates 3.67 3.59 0.07 1.97
Others 0.04 0.03 0.01 32.52
Total 395.48 413.07 -17.59 -4.26
* Defined as individuals investing Rs 5 lakhs and above
Others include Banks/FIs, Corporates and FIIs
 
Table 2 – Composition of retail folios (in lakh)
 
Investor Classification Mar 2014 Sep 2013 Absolute Change % Change
Equity Oriented 273.54 292.11 -18.57 -6.36
Debt Oriented 56.22 53.31 2.91 5.47
Balanced 22.47 23.30 -0.83 -3.57
Gold ETF 4.89 5.24 -0.35 -6.68
Liquid/Money Market 1.99 1.68 0.30 18.12
ETFs(other than Gold) 1.95 1.52 0.43 28.34
Fund of Funds investing Overseas 1.68 1.65 0.02 1.48
Gilt 0.48 0.52 -0.05 -8.94
Total 363.21 379.33 -16.13 -4.25
 
 
Table 3 – Composition of high net worth individuals’ (HNIs) folios (in lakh)
 
Investor Classification Mar 2014 Sep 2013 Absolute Change % Change
Equity Oriented 16.29 17.65 -1.36 -7.70
Debt Oriented 7.81 7.67 0.14 1.84
Balanced 3.51 3.97 -0.46 -11.58
Liquid/Money Market 0.65 0.54 0.12 21.67
Fund of Funds investing Overseas 0.12 0.08 0.04 46.97
Gold ETF 0.09 0.10 -0.01 -11.34
Gilt 0.06 0.08 -0.01 -18.56
ETFs(other than Gold) 0.03 0.03 0.00 12.95
Total 28.57 30.12 -1.54 -5.13
 
 



 

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