Think Twice before Falling for ‘Equity Savings’ or ‘Equity Income’ Schemes
Arbitrage schemes of mutual funds (MFs) take advantage of mispricing in the spot and derivative market of equities. Pure arbitrage schemes do not take unhedged equity exposure and their returns are in line with those of liquid schemes. Over the past couple of years, several versions of arbitrage schemes were launched as the category turned attractive after the Union Budget 2014 modified the...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
  • Equity MF folios continue to rise as the market moves higher
    Retail investors continue to flock to equity mutual fund schemes. According to CRISIL Research, equity-oriented mutual funds constitute 76% of the total retail portfolio. As the Nifty went up by 7% over the past quarter, retail equity folios too, increased for the seventh quarter in a row. As many as 0.58 million equity-oriented mutual fund folios were added in the June quarter, taking the total tally of equity folios to a high of 35.4 million. Balanced schemes, with higher orientation towards equity, too continued to ride the equity wave. The category added 109 thousand retail folios in the June quarter to push the total to 2.45 million.
     
    High net-worth individuals (HNIs) added 105 thousand folios in the June quarter. AMFI identifies HNIs as those investing Rs5 lakh or more. HNIs preferred to invest mostly in equity, debt and balanced funds. Though equity funds dominated the segment with 49% share (9.31 lakh folios), debt fund folios have increased in the past four quarters. The debt category added 42,000 folios to stand at 0.73 million folios in the latest quarter against 26,000 folios added in the previous quarter. The equity category added as many as 36,000 HNI folios, while the balanced scheme category added 18,000 folios.
     
    Just a little of over 53.20% of retail AUM stayed in equity mutual schemes for more than two years, albeit higher than 52.94% in the preceding quarter. Of the Rs2.45 lakh crore of retail investments in equity-oriented mutual fund schemes, Rs1.30 lakh crore was held for over 24 months. In comparison, about 26.48% of HNI AUM stayed invested in equity mutual funds for more than two years, higher than 23.96% in the previous quarter.
     
    The total number of mutual fund folios touched 4.89 crore as on 30 June 2016, as per data from the Association of Mutual Funds in India (AMFI). As many as 1.3 million folios were added in the June quarter, up 2.65% sequentially. Retail folios constitute as much as 95% of total mutual fund folios. In the June quarter, 114 thousand folios were added, as compared to 170 thousand folios in the March quarter. Retail folios touched a six-year high of 46 million.
     
    Meanwhile, the liquid retail category added 0.19 million folios to touch a record high of 0.47 million. The debt category added 0.27 million retail folios in the latest quarter compared with 0.33 million added in the preceding quarter. Moving towards the 50 million milestone mutual funds added 12.61 lakh folios, up 2.65% sequentially, in the June quarter to take the tally to a record high of 4.89 crore, according to the data disclosed by the Association of Mutual Funds in India (AMFI). 
     
    Corporates continued to dominate mutual fund assets under management (AUM) with 46% share in the June quarter against 47% in the March quarter. HNIs were the second biggest contributor with 28% share. The retail segment’s share was steady at 22%.
     
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    nagaraju lanka

    3 years ago

    i want to have your advice on my investments.and i am retiring in 10 months.how to contact you online .please let me know about your online information for such advise

    Ramesh Poapt

    3 years ago

    Lack of alternative saving/ investment avenues, incentives for T15 cities, Govt/media's aggressive 'posative' views of the economy did the trick. If proper asset allocation not in place, future will not be as bright as it seems today. The party may go on for quite sometime though....on account of great global liquidity flood. rally in mid/smallcapsmay suggest that we are in the last lag of the bull cycle, which may go on further...

    Suketu Shah

    3 years ago

    The no of folios is only high as they never remove folios of people who have died or not invested in mfunds for 5 yrs or more.

    Natraj Jayaraman

    3 years ago

    There's a tendency to invest more in equities as valuations rise and become progressively more expensive even as actual earnings remain a hit-or-miss. Rarely anyone in the retail segment buys when the market is at the bottom when valuations are relatively cheap. The herd mentality prevails either way. So I wonder how much of this money flow into equities is akin to buying at the top of a bull market cycle.

    Rahul Pande

    3 years ago

    Do the investors have any choice.With FDs and postal investments being unremunarative and real estate and chit funds cheating investors.Stock market is not lay investors cup of tea.At least mutual fund houses are their saviours.

    Buying mutual funds from banks? Know what they push at you
    In FY15-16, mutual fund distributors earned as much as Rs3,648 crore in the form of commission and expenses. Of this, the 28 banks on the list earned a commission of Rs1,286 crore or nearly 35% of the total commissions paid out. As we have often pointed out in the past, for banks, a high concentration of in-house mutual fund sales is of their sponsored asset management companies (AMCs). Based on the distributor commissions of FY14-15, more than 1/3rd of the commission pay-outs to banks are sourced from its in-house AMC. Not much has changed in FY15-16.
     
    Bank-sponsored mutual funds are hugely dependent on their sponsor for inflows. Bankers command enormous reach and trust among their customers compared to other distributors. For Axis MF nearly 21% of the gross inflows were from Axis Bank. Axis MF paid out Rs92 crore to Axis Bank, nearly 56% of the total commissions paid to distributors. NJ IndiaInvest, a national distributor, earned a commission of Rs20 crore or about 14% of the total commissions paid by Axis MF.
     
     
    For ICICI Prudential MF, nearly 40% of the gross inflows were through ICICI Bank. Therefore, not surprisingly, the banks earn the highest commissions compared to other distributors on the list. For ICICI Prudential MF, nearly 21% of the total commissions were paid to ICICI Bank. Citibank was the next highest commission earner of ICICI Prudential MF earning 5.80% of the total commissions. ICICI Securities earned nearly 4% of the total commissions paid.
     
     
    Similarly, in the case of HDFC MF, as much as 16% of the total commissions were paid to HDFC Bank. Second on the list was NJ IndiaInvest earning about 9% of the total commissions paid by HDFC MF. SBI had a share of 28% in the total commissions paid by SBI MF, while Kotak Mahindra MF paid nearly 33% of the total commissions to Kotak Mahindra Bank and Kotak Mahindra UK. While HSBC MF has not disclosed the distributor’s commissions for FY15-16, in FY14-15, as much as 46% of the total commissions were paid to HSBC Bank, Standard Chartered Bank followed behind earning a commission of 11%.
     
     
     
     
    The top three banks on the list—HDFC Bank, ICICI Bank and Kotak Mahindra Bank earned total commissions of Rs261 crore, Rs170 crore and Rs166 crore in FY15-16. HDFC Bank, earned Rs91 crore (or 31% of the total commissions) from HDFC MK. Nearly, 61% of the total commissions of ICICI Bank were from ICICI Prudential MF. For Kotak Mahindra Bank, about 29% of the commissions were sourced through Kotak Mahindra MF. Canara Bank, State Bank of India and Union Bank of India earn over 90% of their commissions from their in-house AMCs.
     
     
    Clearly, for each bank, the best mutual schemes are none other than the schemes belonging to their own group or the ones that offers the maximum commission. The data showing that banks push hard schemes belonging to the group which may or may not be in customer interest proves our point once again. Unfortunately, savers don’t know this and tend to trust their bankers blindly. After all, that is the place where they keep their savings.
     

     

  • Like this story? Get our top stories by email.

    User

    COMMENTS

    JP SINGH

    3 years ago

    its bankers game to misguide innocent investors and make money out of it. if some one have little bit time then visit the individual AMC site and buy direct plans. or open account with MFU (mutual Fund Utilities) once and start purchasing direct plans across the fund houses online.

    SuchindranathAiyerS

    3 years ago

    I have found buying mutual funds from banks convenient. Convenience has come at a price. This is a good analysis and break down of the collective price. But, beyond convenience, there is the profit motive that made the Banking Industry into an arena for Harvard, Princeton, Wharton and other MBA Junk Bond Salesmen.

    I have found HSBC fairly sensible since more than fifteen years. But, Richu Singh,from Dehra Dun, then of HSBC, Bangalore, did rook me out of some 4.6 Lakhs (2010) by selling Canara Bank - HSBC life insurance to me. An insurance that I certainly did not need, and was a foray into Life Insurance and portfolio management by unqualified, incompetent and greedy bankers.

    HDFC offers a good "entirely at your risk" on-line option. I have been rooked very badly by SBI, UTI and LIC.

    Dilip Modi

    3 years ago

    Equally unreasonable is the distinction made between direct purchased MF plans and so called indirect ones. When a share deal / MF portal is used, one expects the cots to be considerably less than going via a broker but to the best of my understanding both sets of via purchases attract the same commission? Why?

    Dilip Modi

    3 years ago

    It is incomprehensible to me that whilst the banks can sell MFs, Equity, Bonds, Insurance, etc but when it comes to "Know Your Customer", it acts as a separate entity and puts the customer through the same wringer, several times, periodically and only acts with the directive of the Regulator. With so much commission revenue is it too much for them to take a joint initiative to create a single window?

    Param

    3 years ago

    this is interesting. thanks for sharing. while other distributors push the funds that give highest commission, banks might have some commitment with their sponsor to sell those funds. i wonder who will put an end to this incest.

    Ravindra Shetye

    3 years ago

    One more thing. They also try to push the Close Ended Schemes where your investment is blocked for the tenure of the scheme. Do the employees get any extra commission for selling Close Ended/Fixed Tenure Schemes?

    Sanjay Saxena

    3 years ago

    Lot of MF investors don't realise that by investing through banks or MF portals they end up buying regular MF plans which have higher expenses to compensate the 'broker' who may be their bank RM. This automatically results in a lower performance compared to an identical Direct MF plan.

    M Muralidharan

    3 years ago

    INVESTORS should pay for advisory services with Planners, get advice and buy directly without commission. No Banks, brokers, agents....

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)