Mutual Funds
CAMS research on creation of MF new folios throws up debate

The transfer agent for mutual funds says ban on entry loads has not affected the trend of new folio creation, which mirrors the market

Computer Age Management Services (CAMS), a transfer agent for mutual funds, says that post the abolition of the entry load, the monthly average for new folio creation for mutual funds has improved. However, it states that the entry load had no effect on creation of new folios which mirrored the Sensex. But a careful observation of the research shows that the basis is debatable.


For, CAMS has compared the trend in new folio creation in a falling market, between April 2008 and July 2009, to the folio creation there onwards, from August 2009 to July 2010, during which period the market rose. This is a poor comparison, as it would only be expected that there would be more new folio creation in a rising market than there would be in a falling market. It would make sense to compare folio creation in similar market scenarios.

According to data presented by CAMS in a research report, from January 2008 to December 2008, when the markets fell, new folio creation declined. After this, as the market started to revive, new folio creation started to pick up.

What's interesting is that according to CAMS, "post August 2009 the average monthly run rate (of new folio creation) actually improved to 3 lakh folios per month". But it can be argued that folio numbers would have risen irrespective of a ban on entry loads in August 2009, as the markets had already picked up momentum.

CAMS says that from April 2008 to July 2009, the average folio creation was 2.73 lakh per month, and from August 2009 to July 2010 it averaged 3 lakh per month. Thus, while the numbers may be correct, the comparison is technically debatable.

A rising markets induces investors to invest and the opposite is also true. So, in a falling market, investors refrain from investments. Same is the case with entry load, as entry load was a negative factor for distributors and the ban was supposed to benefit investors.

In the period under review, the market was in decline for 11 of the 16 months and the entry load was effective during the entire 16 months. Hence, by the rule of thumb, the two negative influences should have seen low new folio creation. In the second phase, after the ban on entry load, the market was also rising and therefore these were two positive factors which would have naturally been an encouragement for new investments and therefore new folio creation. Still, the increase was just 10%.

What would be useful is comparing the effect of the entry load ban on creation of folios in a consistent market scenario. If we take an extended period for the first phase, say August 2007 to July 2009, the average folio creation is 4.6 lakh per month, which is in fact a lot higher than the post August 2009 phase, which averaged 3 lakh new folios per month. It must be mentioned that the two years from August 2007 to July 2009 included a bear run too.

The market scenario was consistent from August 2007 to July 2008 and was at about the same level from June 2009 to May 2010. While in both these periods the markets were doing alright, in the August 2007-July 2008 period the upfront commissions were applicable, whereas in the June 2009-May 2010 period the commissions were discontinued. In the first instance 84.7 lakh new folios were added at an average 7 lakh per month, whereas in the second period only 34.6 lakh new folios were created at an average 2.8 lakh per month.

Therefore, to say that the ban on entry load has not made much of a difference, is  debatable.



ranjan dutta gupta

6 years ago

It does not reflect the real position of Mutual Fund growth.Folio number might have increased on account of SIPs.Growth of SIPs were more till December 2010 when there was no need to have KYC.Introduction of KYC has in fact put an obstacle for the growth of SIPs from semi urban and rural areas.It is important to recognise what is the proportion of folio creation durint January -March period of 2011.It should also to be compared with last year's folio creation for the same period.Total inflow in equity Mutual Fund also to be compared for the same period.Then only actual figures will come out.

Sunil Date

6 years ago

The S&T agents should concentrate on their own functioning and carry out research & surveys about it, from the IFA's. They have become so bureaucratic that it is frustrating to deal with them and no body including the AMC's, AMFI, SEBI, etc give a damn about it.


6 years ago



6 years ago

obviously CAMS research is true. Sellers are banks - see how aggressively SBI sells sbi mutual fund..Axis...Hdfc,....Icici...what does performance or load have to do? the bank has an ego...and as a valuation game, AUM garnering is a must...!!

Narendra Doshi

6 years ago

Pl get data for 3/5/10 years and may be there will be no need to write such an article.
MF is a relatively nascent avenue,One needs MORE educative info, encouraging info which attracts MORE people to it & in the long run of 15/20/25 years it becomes something alike the savings bank account one is so used to.
It also makes business sense for CAMS to appreciate the above views and promote the MF advatages, from time to time.



In Reply to Narendra Doshi 6 years ago

why 3/5/10 years and not 20 years?
remember the following among many others?
1. Canstar
2. Cantriple
2. BoI Double Square Plus
4. Ind Ratna
And of course, remember UTI?
Its not so simple as you think.
The most unscientific way of doing analysis is picking already known winners with the benefit of hindsight and arguing, if only you had invested in Reliance Growth...


In Reply to hemant 6 years ago

Dear Hemant,
20 years can also be taken and even more provided you have such funds existing. I was eliminating the early years of MF industry being the learning period etc.
Also, nothing is simple but still one must keep doing meaningful analysis and learning, modifying from it.
All the same, tks for your comments.


In Reply to NARENDRA DOSHI 6 years ago

1. I disagree about the "learning period". Equity markets are the same and nobody learns. Take the case of FIIs. I am sure you would agree that their 'learning period" is long over. Do you remember the kind of Indian companies that could do GDRs easily in 1994-95? In 1994, how were FIIs investors in a market when the Sensex P/E reached 57!!!
2. The last 10 years of data includes the best period for the Indian market ever. It has nothing to do with learning. Lets see how they perform from now on

Future Capital FY’11 net profit down 26% at Rs44.15 crore

The profit-after-tax of Future Capital for the financial year ended 31 March 2011, stood at Rs47.55 crore, a 175% jump vis-a-vis the year-ago period

Kishore Biyani-led Future Capital Holdings has reported a 26% decline in consolidated profit after tax to Rs44.15 crore for the year ended 31 March 2011, owing to one-time tax provisioning arising out of the merger of the company with its subsidiary.

On a standalone basis, however, the profit-after-tax of the company for the financial year ended 31 March 2011, stood at Rs47.55 crore, a 175% jump vis-a-vis the year-ago period, Future Capital Holdings said in a statement.

Future Capital Holdings vice chairman and managing director V Vaidyanathan said, “The realignment of the joint ventures with Centrum and the merger of Future Capital Holdings with its subsidiary are two significant events of the last quarter. These moves will release capital and set it up for growth.”

On a consolidated basis, tax provisioning was increased to Rs39.7 crore from Rs0.9 crore due to the one-time impact of the merger of Future Capital Holdings with subsidiary Future Capital Financial Services, while on a standalone basis, the tax provisioning was increased to Rs20.4 crore from Rs3.5 crore.

On a consolidated basis, the company’s total loan book grew by 90% to Rs2,855 crore from Rs1,495 crore a year ago.

Future Capital and Centrum Capital had rearranged the shareholding of their two existing joint ventures, FCH Centrum Wealth Managers and FCH Centrum Direct Ltd.

Future Capital has also merged its subsidiary, Future Capital Financial Services.

On Friday, Future Capital ended 0.95% up at Rs143.05 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.07% to 18,531.28.


Kale Q4 consolidated revenues at Rs48.58 crore

For the quarter ended 31 March 2011, Kale has recorded consolidated revenues of Rs48.58 crore compared to Rs46.42 crore for the corresponding quarter of the previous year

Kale Consultants, the leading solutions provider to the airline and travel industry, has recorded consolidated revenues for the 12 months ended 31 March 2011 at Rs177.29 crore compared to Rs165.92 crore during the previous year. For the quarter ended 31 March 2011, Kale has recorded consolidated revenues of Rs48.58 crore compared to Rs46.42 crore for the corresponding quarter of the previous year. The consolidated PAT stood at Rs5 crore compared to Rs6.42 crore during the corresponding quarter of the previous year.

Standalone revenues stood at Rs137.30 crore for the 12 months ended March 2011, compared to Rs126.73 crore for the corresponding period of the previous year. Net profit stood at Rs13.1 crore compared to Rs19.14 crore in the previous year. For the quarter ended March 2011, Kale recorded revenues of Rs37.1 crore compared to Rs382.14 million during the previous year. Net profit (before prior period item) for the quarter ended 31 March 2011 stood at Rs22 crore compared to Rs6.65 crore in the previous year.

The company has changed its financial year end from 31 March 2011 to 30 June 2011 as a result of which the current financial year will be for a period of fifteen months i.e from 1 April 2010 to 30 June 2011.

On Friday, Kale Consultants ended 1.90% down at Rs87.80 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.07% to 18,531.28.


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