With the benchmark Sensex falling 1,000 points last month, the confidence of retail investors, who access stock markets through mutual funds, has been hit. Earlier, executives had hoped retail participation in the segment would rise, as was the case during the December-January period.
In February, gross sales of equity schemes, including equity-linked saving schemes, plunged 33 per cent to Rs 3,700 crore, against Rs 5,600 crore in January. However, redemptions from equities continued unabated.
This could come as a jolt to the struggling sector, which has been trying to attract retail investors for long. Though signs of a recovery in the sentiment among investors were seen at the beginning of the year, these turned out to be short-lived.
According to a Crisil report, in February, assets under management (AUM) of India's equity-related funds plunged about seven per cent-the steepest fall in 15 months. At the end of February, AUMs stood at Rs 1.76 lakh crore, against Rs 1.9 lakh crore in January. The decline in equity AUMs was led by mark-to-market losses in underlying assets, as well as marginal outflows, the report added.
In February, Indian benchmark indices lost about five per cent. As on February 28, equity assets accounted for 22 per cent of the industry's overall assets.
Since December, gross sales were on the rise, which, to some extent, countered the continuous redemptions. Compared with November, equity sales had nearly doubled in January.
"The markets had peaked, and this made investors hold on to their fresh investments. Also, traction towards tax-free bonds and other tax-saving instruments was seen," said Akshay Gupta, chief executive and managing director, Peerless Mutual Fund.
A sharp fall in net outflows from equity schemes was a positive for the industry. At Rs 163 crore, the outflows in February were the lowest this financial year. So far this financial year, overall net outflows from equity schemes stand at Rs 15,354 crore---an all-time high.