As much as Rs6,139 crore was redeemed from equity mutual fund schemes during October 2013, leading to a huge net outflow of Rs3,542 crore for the month
Equity mutual fund schemes have reported a net inflow of funds in just three of the past 18 months. Over the past twelve months, as much as Rs15,000 crore has flowed out of equity mutual funds. Though sales of equity schemes improved in October to Rs2,597 crore compared to Rs1,996 crore in September, high redemption pressures led to a massive outflow of Rs3,542 crore, the highest in the past 13 months. Redemptions peaked to Rs6,139 crore, the highest in the past four months.
With the heavy redemption, the number of equity folios also declined. The number of folios declined to 30.62 million in October from 31.17 million in September. Despite the huge outflow, equity assets under management (AUM) in October increased by 6.77% to Rs1.73 lakh crore from Rs1.62 lakh crore in September, thanks to a boost in stock markets. Over this period the S&P BSE Sensex gained as much as 9.21%.
Since the beginning of April 2013 to the end of October 2013, equity folios have declined by 7.69% to 30.62 million from 33.17 million recorded on 31 March 2013. According to a report from CRISIL on mutual fund folio numbers, a sharp decline in retail folios was mainly in the equity category which has been impacted by the ongoing volatility in the segment. “Macroeconomic weakness in the domestic market coupled with some mixed cues from the global market led to the decline in the local market,” the report stated.
While retail investors are moving out of equity, high networth individuals have not lost their faith in the long term wealth generating asset. According to the research report, the total folios held by high networth individuals (HNI), defined as individuals investing Rs5 lakh or more, rose three times in the first half of the current financial year led by a sharp rise in equity folios. In the category, the equity segment added over 14.27 lakh folios followed by balanced funds and debt oriented funds, which added 3.45 lakh and 2.72 lakh folios in the past six months (ended September 2013). In AUM terms, HNI portfolio in equity oriented funds increased by 30%.
The CRISIL report further stated that, debt funds continued to attract retail investors with the category witnessing an uninterrupted rise in retail folios since March 2009. Debt funds added 1.79 lakh folios over the past six months (ended September 2013) compared to 1.69 lakh folios added in the previous six months ended March 2013.
The rise in India’s imports is due to seasonality, as imports tend to rise ahead of the festival season, says Nomura
India's trade deficit widened to $10.6 billion in October from $6.8 billion in September. Overall global demand is improving, but higher imports (of oil, gold and others) have led to the deterioration in India’s trade deficit. The rise in imports is due to seasonality, as imports tend to rise ahead of the festival season, says Nomura in a research note.
Export growth rose to 13.5% in October from 11.2% in September, which suggests that global demand continues to recover. Imports contracted 14.5% in October compared with a decline of 18.1% in September, which reflects continued weakness in domestic demand. Within imports, gold and silver imports rose slightly to $1.4 billion in October from $0.8 billion in September ahead of the festival season but was still down sharply from year-ago levels (-80%); oil imports rose 1.7% versus a decline of 5.9% in September; while imports excluding oil and gold fell a more muted 2% from -12.6% in September, according to the research report.
Nomura said, India's current account deficit (CAD) is likely to moderate to $54 billion in FY14 from $88.2 billion in FY13 due to better exports, weak domestic demand and a policy-driven reduction in gold imports.
"Large inflows under the FCNR(B) deposit scheme and the delayed QE taper have led to a surge in capital inflows since September. However, with the FCNR(B) deposit window to close soon (by end-November), oil marketing companies' demand gradually being shifted back to the market and changing expectations around the US QE taper (our US economists now assign a higher probability to a taper in January 2014 relative to March 2014), financing may remain a challenge," it said in a research note.
With the rupee sliding and re-emergence of US tapering talks, the markets slid on Monday, witnessing broad-based weakness
The markets opened Monday on weak footing and stayed weak throughout the trading session, never breaching into green territory even once, underscoring bearishness seen since the beginning of the previous week.
The Sensex and the Nifty opened at 20,596 and 6,110, respectively. The Sensex moved up to the level of 20,672 before dropping off to 20,453, while the Nifty moved up to the level of 6,141 then dropped to as low as 6,067. The S&P BSE Sensex closed at 20,490 (down 175 points or 0.85%) while the Nifty closed at 6,078 (down 61.95 points or 1.01%).
The National Stock Exchange (NSE) recorded much lower volumes at just 58.07 crore shares trading hands, showing inherent weakness. Of the 1,224 shares on the NSE, 398 advanced, 787 fell while 39 remained unchanged, signifying broad weakness and lack of depth.
All sectoral indices were in the red except for IT, media and pharmaceuticals which were up 0.07%, 1.96% and 0.37% respectively. Of the 50 stocks on the Nifty, just eight scrips ended in the green, showing broad-based weakness.
The top five gainers were Dr Reddy (2.82%); Cairn (2.23%); Tata Steel (1.41%); Maruti (0.50%) and HDFC Bank (0.48%), while the top five losers were Hindalco (-4.72%), Axis Bank (3.91%), ACC (3.75%), IndusInd Bank (3.64%) and NMDC (3.54%).
Today’s market was affected by the news of the rupee slide as well as the re-emergence of the ‘tapering’ theme. The Indian rupee fell 94 paise to an eight-week low, while the 10-year government bond yield crept up to its highest point since August. This was spurred by rising US yields.
Meanwhile, the American markets look forward to Janet Yellen, the front-runner of the chairman of the US Federal Reserve, when she testifies to the Senate hoping to pick her brain, so to speak, and may give some clues to tapering as well. However, with the Veteran’s Day on Monday, markets are expected to trade with less than usual volumes.
Asian markets, with the exception of Japan and Hong Kong, finished in the red. Japan went up as the US Dollar firmed against the Yen, since it is an export-oriented economy. The Nikkei index finished up nearly 1% while Hang Seng finished even stronger, up 1.43%. The US stock futures were trading in the green as were European indices.