Mutual fund industry has lost an estimated over 29 lakh investors, measured in terms of individual accounts or folios, in the first 10 months of the current fiscal, mainly due to profit-booking and various merger schemes.
Of more than 29 lakh investors lost between April 2013 and January 2014, most of the folio closures were seen in the equity portfolio despite the efforts of the mutual fund industry to educate investors about staying invested for the long-term.
According to Sebi data on total investor accounts with 45 fund houses, the number of folios fell to around 3.99 crore at the end of January 2014 from 4.28 crore in the last fiscal (2012-13), indicating a decline of 29.41 lakh. Folios are numbers designated to individual investor accounts, although one investor can have multiple folios.
Market participants attributed the sharp fall in the number of folios to profit-booking and various merger schemes in the mutual fund industry, among other reasons. They further said that the trend of folio closures is expected to decline in the coming months as investors are getting confident about the economy and the market in general.
In April-January period, the number of investor folios in equity schemes fell by over 35 lakh. The total number of folios were 2.96 crore at the end of January 2014 against 3.32 crore at March 2013.
The mutual fund industry has been facing consistent equity folio closures for the past few months. Sebi chairman UK Sinha had also raised concerns over the continuous decline in folios.
The decline in equity folios during the first 10 months of the current fiscal (April-January) coincides with Sensex climbing 8.9% during the period.
As per Sebi, the total number of folios in debt funds rose about 5.8 lakh to 67.18 lakh at the end of January this year. Besides, balanced schemes, which invest in equity and debt category, gained 37,614 folios to 26.40 lakh.
In contrast, exchange traded funds (ETFs) lost over 59,000 folios to 6.80 lakh. As on January 31, 2014, the sector offered 1,469 schemes to investors, of which 1,022 were debt-linked schemes and 353 were equity schemes.
The MF industry lost over 36 lakh investor accounts in 2012-13. The last financial year also marked the fourth consecutive year of loss of folios by mutual funds.