The mutual fund industry witnessing a sharp drop in fresh allocations to equity schemes
The mutual fund (MF) industry is witnessing a sharp decline in fresh allocations to equity schemes which has put industry executives and advisors on tenterhooks. It is said that there have been significant queries by investors looking to stop their systematic investment plans (SIPs). Tension is building up among industry executives and advisors.
According to industry data, equity schemes mobilised Rs 13,760 crore in June. It was 28 per cent lower than the 12-month average. In May, the collection was at Rs 12,949 crore, which was the lowest in 14 months.
According to Bharat Bagla, an independent financial advisor (IFA), “Despite the recent rebound in the markets, individual portfolios are still bleeding. Confidence has remained shaky, which has kept fresh flows away”.
According to Ritesh Sheth, co-founder of Tejas Consultancy, “Small-ticket investors, who work as auto drivers or in other unorganised businesses, have started calling for discontinuing their SIPs. Given the unsteady environment for their businesses, they don’t want to bear the SIP bounce charges in case they are unable to maintain sufficient funds”.
Redemptions in equity schemes hit 75 per cent month-on-month in June, to Rs 13,520 crore. Since monthly contribution through SIPs has remained close to the Rs 8,000 crore-mark, industry participants suggest there has been a cut in the average ticket size.
This could be gauged from the monthly decline in SIP contribution, which was 2.4 per cent lower at Rs 7,927 crore. This is the third month in a row to have witnessed a drop in SIP flow. The SIP book is now 8 per cent lower than March’s peak of Rs 8,641 crore.
Stamp duty of 0.005 per cent is introduced from July 1 on any purchase of MF schemes. This also impacts Mutual Fund flows. Industry executives say that while investors are shying away from making fresh allocations to equity schemes, there has been some pick-up in direct stock allocations among retail investors.
