The net outflows from equity mutual fund schemes at Rs1,984 crore, which peaked to their highest in two years in September 2012, continued for the fifth straight month
The mutual fund reforms that came into force from 1st October didn’t seem to have a positive impact yet on the industry. The new regulations triggered a flurry of activity among both, fund houses and investors. Fund houses were busy implementing the single plan structure wherein the regulator has mandated the fund houses to have a single plan under all their schemes. This has led to the withdrawal of systematic investments and dividend reinvestments under plans of existing schemes that have been discontinued. Along with this, the increase in expense ratio allowed to be charged has had no effect. New inflows into equity schemes declined even further. The new inflows could not match with the redemptions, leading to a net outflow of Rs1,984 crore, according to monthly data from The Association of Mutual Funds in India (AMFI).
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Moneylife has written in the past how the Securities and Exchange Board of India’s (SEBI) regulations seem geared to benefit asset management companies (AMCs) rather than investors.(Read: SEBI’s mutual fund rules changes are patently anti-investor) Considering this has been just the first month since the implementation it would be interesting to see if SEBI’s new reforms would be able to “re-energise the mutual fund industry” in the coming months.
Sales, which had touched Rs3,385 crore in August 2012—the highest in seven months, has been on a decline ever since. Sales for the month of October reached just Rs3,072 crore. The additional incentive, in the form of higher expense ratio, has yet to create an impact on sales. Redemptions, though 25% lower than the previous month, were still higher the average redemptions seen April 2012 to July 2012.
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Equity assets under management (AUM) fell by 2% over the month from Rs1.87 lakh crore to Rs1.83 lakh crore while the Sensex declined by 1.37% over the same period. Equity AUM has declined by nearly 5% from May 2011 where the equity AUM stood at Rs1.92 lakh crore when the Sensex was at the same level compared to last month. Over the last few years equity mutual fund sales have struggled and redemptions continued. For CY 2012, equity mutual fund schemes have seen a total outflow of Rs12,377 crore. The highest such redemptions were seen in 2010.
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