The mutual fund industry in India continues to lurch from one bad month to the next, with the latest setback being the continuing loss of retail folios.
Mutual funds lost 4% or 16 lakh retail folios over the past six months ended March 2014 (see table 2), marking the sixth consecutive half yearly decline, according to the data released by the Association of Mutual Funds in India. Overall, at the end of H2FY14, the industry had 3.95 cr folios (including institutional and high net worth individuals’ folios) compared with 4.13 cr folios held at end of H1FY14.
Retail investors continue to exit equity mutual funds
The equity category saw the maximum decline in the number of retail folios (see table 2) as investors chose to book profit after the recent steep rise in the segment and on expectations of volatility ahead. The equity market benchmark CNX Nifty gained 17% in the past six months ended March 2014, helped by positive domestic and global cues.
HNIs too turn away from equity
After rising almost three times in H1FY14, the number of folios held by high net worth individuals or HNIs (individuals investing Rs 5 lakh or more) declined by 5% (or 1.5 lakh) in the second half of FY14 as the segment chose to book profit. The equity and balanced fund categories together lost nearly 1.8 lakh folios but the overall decline in the segment was offset by an increase in the number of folios in the debt oriented and liquid/money market funds (see table 3).
Gold ETFs become unattractive
Gold exchange traded funds posted their second consecutive half yearly decline in overall folio count. Retail folio count in the category fell by nearly 7% to 4.89 lakh in the period under review compared with a 5% decline in the preceding six months. Volatility in the underlying asset class prompted investors to exit the category. Domestic gold prices (represented by the CRISIL Gold index) fell by over 6% in the past one year ended March 2014.
Gilt funds saw highest decline in folios since March 2010
Gilt funds went