Mutual Funds
Equity Mutual Funds: Massive net outflows in February

Eleven months after SEBI got a new chairman, who happened to be the CEO of UTI Mutual Fund, the apathy of investors, distributors and fund companies have greatly increased

Sales of equity schemes in February amounted to a total of Rs3,880 crore, the highest since September 2011. Along with sales, redemptions from equity funds increased, as well. Redemptions touched Rs6,689 crore— the highest since October 2010. This led to a net outflow of Rs2,809 crore from equity mutual funds in February 2012.

Sale of equity linked savings schemes (ELSS) picked up from the month of January but was much less compared to February last year when the stock market was higher. Sales of ELSS amounted to Rs286 crore, up 17%, but was down by more than half compared to last year when the sales touched a high of Rs648 crore.

February saw just one new fund offer—Indiabulls Blue Chip fund—an equity fund, which managed to rake in just Rs13 crore whereas FT India Feeder-Franklin US Opportunities Fund—an overseas fund of funds—managed to bring in as much as Rs104 crore. Two fund companies have filed offer documents to launch similar funds.

The net equity fund flows have fluctuated a lot in the last one year. In the last 11 months equity mutual funds have seen a net inflow of just Rs51 crore which is better than last year. For the 11 months last year, equity mutual funds suffered an outflow of Rs13,591 crore. But despite the huge outflows, sales were much better in the previous period which came up to a total of Rs61,225 crore compared to the sales of the last 11 months which amounted to just Rs45,635 crore.

In short, much less of money is moving in and out of mutual funds, as uncertainties to the business caused by the regulator continued. In February last year, UK Sinha, then the CEO of one of the largest mutual funds, UTI, became the regulator. But this seems to have no difference so far. Indeed, investors are investing in even less, fund companies seem listless and distributors seem to have no interest in selling mutual funds.




5 years ago

@ DG,

Representing the interests of Distributors of MF is not narrow interest. Here is why.

I was into mutual fund sellling in a big way before the commissions were scrapped. Subsequent to the scrappin of commission, there was simply no incentive for me to go out and canvass for the sale of mutual funds at all. Clients are not willing to pay a service charge every time they put some money into a fund. And to service them without any revenue stream was not possible for me.

It was then I decided to become a sub broker with a leading brokerage house. I made all my clients in mutual funds to open a trading & demat account with this broking house. Started advising them actively on the equity market. And on each delivery trade when the clients are charged a brokerage, I get a share in that. My average earning since the last couple of years has exceeded the commission I used to earn by selling mutual funds.

And in the last three odd years, all my clients have only taken out money from mutual funds with no fresh investments made.

May be there are thousands of distributors like me who have found alternate channels to earn money and who have shunned mutual funds totally. This is the main reason why fund houses are not seeing any incremental investments in their schemes.

Deepak R Khemani

5 years ago

Well it is because Mr Sinha came from the industry every one felt that he would turn things around as he would have understood the problems faced not only by the distributors but the AMC's and the investors also, but alas things have moved very slowly and as regards to investors booking profits it is normal, as investors have waited for 4 years at a stretch and have seen zero or even negative returns in many equity schemes so this sudden burst of liquidity which has caused prices to rise from 20% to even 50-60% in many scrips, it is only logical that they will book profits and lock in high interest yields in debt and with the current political uncertainty it will take a brave heart to invest now, although this is the time when buying and remaining invested will actually give decent returns in the "LONG TERM"


5 years ago

Do we have to see outflows as investors runnings away from mutual funds? Could it not be that they are trying to book profits from the rally? The article says that these outflows are highest since October 2010? Don't we see a similiarity between October 2010 and February 2012.



In Reply to pravsemilo 5 years ago

Its normal for MoneyLife to carry unbalanced reporting and opinions like this, without presenting all facets of the story.

Indian domestic investors and funds have sold through the rally, and it's hardly a difficult thing to understand with all the global uncertainty and domestic instability in government. Why should not book profits and take money off the table if I'm not confident of next 6-12 months?

But, the only angle MoneyLife can find here is to beat up SEBI again because Mr. Sinha has not lived up to the broker/agents hopes for reinstating entry commissions.

I put up with this narrow focus on MF broker/agent interest simply because except for this one major flaw, MoneyLife has been good at promoting investor interest.


In Reply to DG 5 years ago


I humbly disagree. Though it could be that retail investors have booked profits - but did you also read the line where they said only net inflow is 51 crores (that too in 11 months) ? And did you also read how inflows have fluctuated? These numbers say how much SEBI is interested in promoting the interest of retail investors. 51 crores is not even 1% of the 6 lakh crores that are managed by mutual funds. Does that imply something? Doesn't it echo what Moneylife has been screaming about dwindling retail investor interest?

SEBI is wrong on its own part. We are better off not judging things - unless we have the complete information - which of course we don't have. Media (I mean moneylife not mainstream media) has more information than us. And they do the necessary research before arriving at a conclusion - which is quite evident in articles. You won't find such thing in the sharp dressed dim witted anchors of "breaking" news channels.

Wasn't it the mainstream media who hailed Bhave as the messiah?


In Reply to pravsemilo 5 years ago

I agree we are better off not judging things on the basis of partial information. And MoneyLife indeed focuses more attention on several investor and consumer interest areas than other "mainstream" media. Multi-level schemes are one prime example.

My main complaint against such MoneyLife articles is limited to the narrow, one-sided view provided and lack of the larger context.

Net retail investor inflows into MFs always go up in rising markets and fall in falling markets. Instead of looking at overall market conditions, the article only tries to link it to SEBI and Sinha's appointment. I have no problem with this being pointed out as one factor, but trying to see MF inflows in isolation with market trends is strange to say the least.

S&P launches index to measure returns on Indian equities

“The S&P CNX Nifty Futures Real-time Index has been created for international investors seeking an efficient way to measure the performance of the fast-growing Indian economy and equity market,” said Michael Orzano, associate director of Global Equity Indices at S&P Indices

Singapore: Standards Poor’s (S&P) Indices has launched a new index to measure the returns on exposure to the Indian equities, based on Singapore Exchange (SGX)-listed S&P CNX Nifty Index futures prices, reports PTI.

“The S&P CNX Nifty Futures Real-time Index has been created for international investors seeking an efficient way to measure the performance of the fast-growing Indian economy and equity market,” said Michael Orzano, associate director of Global Equity Indices at S&P Indices.

“The index is also designed to serve as the basis for tradable products, opening an important portal for global investors into the Indian market,” said a statement from S&P and SGX late last night.

The index tracks the performance of a portfolio holding a single SGX Nifty Futures, reinvested on a monthly basis.

The index series is based on the front month Nifty Futures contract traded on the SGX and reinvestment occurs over a three business day period preceding expiration, the statement said.

The SGX Nifty Futures is based on the S&P CNX Nifty Index, the headline index of the National Stock Exchange of India which is owned and managed by India Index Services & Products.

“The underlying futures contract is liquid and US dollar-based, making the index a unique and investable benchmark for international fund managers to gain exposure to India’s equity capital market,” said Michael Syn, head of derivatives at SGX.


Public Interest Exclusive
How to use RTI Act for civic issues

Often, municipal corporations carry out flawed projects which go against public interest and only suit vested interests. Use of RTI can help unearth such irregularities. Here’s a startling example...

The Mula-Mutha rivers in Pune resemble stinking nallahs, yet the Pune Municipal Corporation (PMC) had a brainwave of implementing a river navigation project on a 25-odd km stretch from Ramwadi to Kharadi, envisioning boat rides as one of the activities to save Puneites from road traffic.
Curiously, this multi-crore project includes an exhibition ground, playgrounds, open-air auditorium, circus ground, advertisement parks, parking spaces, plazas, flea markets and pedestrian malls and Chor Bazaar on the river bed. When citizens began protesting about the nature of the project, the PMC cunningly changed the name from “River navigation project” to “River restoration project”. However, it was the document procured under the RTI Act by architect and RTI user Sarang Yadwadkar that brought out the shocking truth. In a letter signed by the then municipal commissioner Praveensinh Pardeshi, it states that the project will be re-named as a ‘restoration’ project but work will go on as a ‘navigation’ project.
 What does this project entail? In a situation where Pune is suffering from a water crisis even before summer has set in, the project entails increasing the depth of the river to accommodate more water and putting a wall on both sides by narrowing it. This would allow boats to sail along and the banks can be allegedly reclaimed for construction activities.  Firstly, where is the availability of water to be released from the Khadakwasla dam? Secondly, with Pune also suffering from flash floods which had killed 1o people in one such flood in 2010, the embankment would further lead to more incidences of flash floods in more localities.
States Mr Yadwadkar, “As the river will be walled at three different locations and made narrow, the water level in the river is going to rise. Due to the increased water level in river, there would be stagnant back water in the nearly 150 nallahs which release water/sewage water to a distance of nearly 550 metres. During monsoons, the basic role of the nallahs is to carry storm water to the rivers. This would not be possible due to the wall and flash floods will occur more frequently and with higher severity. Besides, this stagnant water in the congested parts of the city is definitely going to result in a very serious health hazard, all through the year.”
 What’s worse is that the PMC has already spent Rs68 crore despite objections by the ministry of environment & forests (M0EF). This fact was revealed after Mr Yadwadkar received a reply to a RTI query from the MoEF. A letter by AK Bhattacharya, member of the ministry’s expert appraisal committee has said in his report: “the most prudent action is not to interfere with the natural flow of rivers. Construction of bunds (as proposed in the restoration project) goes against this concept and is unlikely to improve river water quality, which is a major problem with Pune rivers.” Even the Central Design office Nashik has opposed it.
Another RTI document procured from the MKVDC (irrigation department) and PMC revealed that while the maximum discharge from the Khadakwasla Dam by the MKVDC during the monsoons has been 1,28,899 cusec in the river, while the river restoration project has catered for a maximum flow of only 60,000 cusecs. States Mr Yadwadkar, “This reduced water carrying capacity is going to result in far more severe and frequent floods as the excess water will jump all around residential areas.”
While the PMC kept this secret well-guarded, it has come to light through the RTI that massive excavation has been proposed for channelization of the river near the foundation of the pillars and around 18 bridges, which are the lifelines of commuting in Pune. That, it will destabilise the bridges and perhaps lead to their collapse was amply reflected in an incident in Korea where excavation near the pillars had led to the collapse of the bridge as recently as August 2011.
The  Detailed Project Report of the river restoration project procured under RTI shows that the excavation for the channel would amount to about 33,55,000 cubic metres of surplus rock which will be required to be disposed off. Mr Yadwadkar states that, “disposal of this surplus rock in such huge quantities would require huge area of land and about 6,75,000 trips of trucks from city to the site of disposal. The minimum cost of just transporting the debris would cost Rs200 crore. This cost has not been included in the estimated cost of the project.”
Armed with this vital information, Mr Yadwadkar along with other citizen groups is spearheading a citizen campaign, by first making citizens aware of the absurdity and gravity of the project.
Thanks to the RTI Act, such flawed projects are being brought to the notice of the people even before they have been fully implemented. You can do the same for your city or town. Do not suffer injustice of being badly governed by the local self-government. If you have a doubt, be it of the bad state of the roads; overflowing garbage; flyovers and bridges thoughtlessly proposed or any other such civic amenity, please do invoke the RTI to find out the nature of the proposal, expenditure and details of its implementation. It is only when more and more people use RTI for civic issues, that steadily good governance will show its hopeful face.



Babubhai Vaghela Ahmedabad 9427608632

5 years ago

Excellent use of RTI in larger public interest. In my openion, every citizen should file RTI applications pertaining to own area of interest that should overall help improve governance.

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