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6.5 lakh equity fund investors exit in Sept

Profit booking in equity funds sees Rs 12,000 crore being redeemed on back of a rising market

Strong buying by FIIs has resulted in the markets surging by 10 per cent in September. Investors, who entered the markets in 2007-8 when the markets were scaling new heights, had to contend with large losses until recently when they found their investments cross the levels at which they bought them.

AMFI (Association of Mutual Funds in India) data for September shows that more than 6.5 lakh investors pulled out of the equity funds during the month. The drop in number of equity folios is highest ever in the recent past. With this the number of equity folios goes below the 4 crore mark. At the end of September, the number of equity folios was 3.95 crore.

Equity funds saw a net outflow of Rs 7,000 crore , which was much less compared to the Rs 12,000 crore outflow from diversified equity funds. Overall, the number of folios dropped by 5.85 lakh across different categories of funds to 4.71 crore. At the beginning of the financial year (April 2010), the total number of folios was 4.81 crore.

A recent Value Research survey of mutual fund CEOs indicated reluctance amongst fund distributors to sell mutual funds post-entry load ban. The impact of the ban has resulted in the slow asset growth of equity mutual funds, and their higher redemption because of rise in equity markets. “Lower sales and higher redemptions have together contributed to slow AUM (assets under management) growth. I believe the market conditions are more responsible for the muted growth in AUM,” Rajan Krishnan, chief executive officer, Baroda Pioneer Mutual Fund, said.

Achal Kumar Gupta, managing director, SBI Mutual Fund said higher redemptions have nothing to do with distributors. “At this point of time, the markets are bullish and many people are booking profit,” he added. All large fund houses except for HDFC Mutual Fund have shown a drop in number of folios in their equity schemes. In percentage term, ICICI Prudential lost 2 per cent of folios, while Birla Sun Life witnessed a drop of 1.6 per cent in September. In absolute number, SBI Mutual Fund witnessed the maximum drop of 86,500 folios followed by Reliance Mutual Fund (79,500) and UTI Mutual Fund (75,000).