If 2014 was a game changer for Indian politics, it wasn’t much different for the Indian mutual fund industry either. As the country saw a majority government storm to power after three decades, the positive sentiment resulted in markets touching new highs and, consequently, equity mutual funds registered their highest inflows in a decade.
In CY14 till November, equity schemes saw inflows of Rs 45,770 crore — the highest in last 10 years. The second-best inflows into equity funds was during the bull run of 2006 at R37,184 crore. Market participants attributed the record inflows to the positive sentiment around an improving macro situation and political stability.
However, there are many who believe that the launch of closed-ended schemes by many fund houses helped boost equity inflows in 2014.
During the year, around 60 new equity schemes were launched by different fund houses, out of which over 35 were closed-ended, collecting approximately R7,400 crore. In the 11 months of 2014, the highest inflow came in July at R11,056 crore — half of that amount came through JM Arbitrage Advantage Fund.
Dinesh Kumar Khara, MD & CEO, SBI Mutual Fund, said: “The year started on a positive note, but investor sentiment was especially revived after May. First, high networth individuals (HNIs) and ultra HNIs entered the industry and, later, retail investors came in through MFs. Investors who had lost money after the 2008 crisis also participated in MFs.” In 2014, the benchmark Sensex gained as much as 29%.
Over the past few years, volatile markets and lack of incentives for distributors had seen mutual funds register net redemptions. In 2012 and 2013, equity schemes saw outflows of R15,133 crore and R10,660 crore, respectively. But with equity markets on the rise and steps taken by the industry as well as Sebi to ‘incentivise’ distributors, there seems to renewed enthusiasm for mutual funds.
S Krishna Kumar, head, equity, Sundaram Mutual Fund, said: “In the last few years, we saw a lot of retail money going into gold and fixed income. But amid improved sentiments and rising markets, we saw retail investors coming back to mutual funds. We expect more reforms to be ushered in by a stable government, which should help equities perform well over the next few years.”
Industry participants also said the regulator’s thrust on investor education also benefited the industry. However, even though the MF industry has crossed the R10-lakh-crore mark in AUMs, the equity component still has assets of just over R3 lakh crore. To woo long-term investors to equity schemes, fund houses would need a more pragmatic approach than just launching new thematic schemes.