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Equity Schemes Sales Plunge

Despite rising markets, equity fund collections have fallen off

Data available with the Association of Mutual Funds of India (AMFI) reveals that sales by equity schemes have nearly halved in three months time, after the market regulator Securities and Exchange Board of India (SEBI) abolished entry loads, starting  August.

Sales of equity schemes have come down to Rs 3,363 crore in September, which was 15 per cent lower than the previous month.

But even more significant was the fall in equity funds collections in August. Sales in equity schemes fell to Rs 3,954 crore in August from Rs 6,343 crore in July, a difference of 37 per cent.

As can be seen (check table), new fund (NFO) collections have virtually fallen into an abyss too. From a July high of Rs 2,394 crore, collections fell to a mere Rs 82 crore, before rising to Rs 826 crore in September.

The blame can mainly be put at the door of the distributors, who have openly said they will refuse to promote or sell mutual fund products sans commissions.

Things don’t look good for the near-term either as analysts maintain that a lot of distributors have not even finalised their fee structure for investments. As of now they are in the process of figuring out how to get paid an amount that would be fair value for their exertions- they don’t look to be in a hurry.

Others say that the evolvement of the new model will take quite some time, though the impact over sales is not here to stay for long, they aver.

Another reason why investors are not flocking towards investments in equity funds is that markets have been rallying too fast, too high, and there are concerns of overvaluation and there is fear being expressed of an imminent correction.

Be that as it may, what is clear from the above is that mutual fund houses are stuck between a rock and a hard place in the form of distributors and SEBI. Where that leaves the investors is still unclear, but effectively, it does restrict their freedom as they cannot choose the best investment vehicle tailor-made for  them, mutual funds.

Sales: Equity Schemes (Rs Cr)
Month NFO Collections Collections in Existing Schemes
2009-Sep 826 3363
2009-Aug 82 3954
2009-Jul 2394 6343