After marginal inflows in June, equity mutual funds faced a net outflow in July on account of poor fresh inflows and higher redemptions
July was again a dreadful month for the mutual fund industry. It witnessed a total net outflow of Rs50,067 crore for the month. The industry faced heavy redemption pressures in all categories of schemes. Much of this happened due to heavy redemptions in liquid schemes, because of central banks’ policies tightening liquidity. Liquid schemes suffered a total net outflow of Rs45,296 crore. Income schemes too, faced higher redemptions, leading to a net outflow of Rs2,657 crore. Comparatively, outflows from equity mutual fund schemes were much lower. But, since the beginning of FY13-14, equity mutual fund schemes have lost assets over Rs3,000 crore in net outflows.
Sales of equity mutual fund schemes declined to the lowest in the past eight months. The quantum of sales in July 2013 declined by 11% to Rs2,945 crore, compared to Rs3,311 crore for the same month last year. Redemptions too were higher at Rs4,772 crore, up 12%, from Rs4,260 registered in July 2012.
Approximately 12% of the inflows into equity schemes come from direct plans. Compared to the total inflows from direct plans across all categories, this translates to just about 2% of the total inflows from direct plans. The largest inflow through direct plans is in the liquid fund category, much of which is from corporate investors. According to a CRISIL report, direct plans constitute 25% of the total industry AUM against 15% in the previous quarter. Debt-oriented mutual funds constitute 98% of the total AUM under direct plans.
Since April 2013, there have been just three equity new fund offers that have been launched. While fund houses are filing offer documents with the regulator to launch new schemes, very few of these are actually being launched. As many as 14 offer documents of equity oriented schemes have been filed, but just two of these schemes have been launched so far. The volatile market conditions and poor response to equity schemes from retail investors may have caused fund houses to put off the launch of the schemes.
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2) The 1992 bull run was not because of the DIIs. Also remember the retail participation in direct equity was higher then. - And like in the past, investors who come to the party late shall end up hurting themselves badly.
I have been investing during 2012-2013 & would not give up; because its my passion....Great people like Sir John Templeton & Aswath Damodaran are my idols.....Many thanks for boosting morale of ordinary retail investors like me by sharing knowledge & experience !!!....Had it been possible I would have rated your comments on various issues with seven stars!
Four factors have significant impact on the health of MF industry, but get over looked:
1) How many new (first time ) investors have been acquired post August 2009,
2) Fall in the no. of folios (investor accounts) &
3) How many new distributors are enrolling for selling MFs &
4) How many distributors have given up on selling MFs.
Institutional funds that are being parked in FMP & Liquid will not be able to camouflage the real weakness of Indian MF industry for long.
MF reforms are now about one year old. And if things deteriorate at a fast pace, then SEBI would be eating crow sooner than later.