Everyone's buying equity-linked mutual funds

Despite the recovery seen in the market in August, equity schemes continued to see money flowing out of their kitty for the third consecutive month. They registered a net outflow of Rs 650 crore (Rs 6.50 billion) as against Rs 209 crore (Rs 2.09 billion) net outflow seen in July 2006, reveals AMFI figures.

ELSS (Equity Tax Saving funds) schemes continued to see net inflow of Rs 98 crore (Rs 980 million) as against Rs 86 crore (Rs 860 million) in July.

However in sharp contrast to these figures, equity schemes (Equity + ELSS) added 7.26 lakh (726,000) new investors in August, which accounts for 92% of the total number of new investors into mutual funds at 7.89 lakh (789,000) as on August 31, 2006. As many as 44,334 new investors were added in debt schemes, while 18,411 new folios were added in balanced schemes, as per Sebi.

Experts believe that this increase in the number of investors into equity schemes despite the net outflow seen in August indicates that while existing equity schemes faced heavy partial redemptions, fresh investors have been entering equity schemes. This could mean that while high net worth individuals are redeeming their money partially, retail investors have come into equity schemes."

Sanjay Sinha, Head - Equity at SBI Mutual Fund said, "A large part of these 7.26 lakh new investors into equity schemes are definitely retail investors, and the redemptions could be profit booking by HNIs (high networth individuals)."

On the net outflow from equity schemes, he said, "An equity outflow of Rs 650 crore is insignificant as it is less than even 1% of the total assets managed by equity schemes."

The assets under management, AUM, of equity schemes stood at Rs 95,093 crore (Rs 950.93 billion), up 7.8% from Rs 88,198 crore (Rs 881.98 billion) in July. AUM of ELSS schemes rose by 10.8% to Rs 6,706 crore (Rs 67.06 billion) from Rs 6,051 crore (Rs 60.51 billion).

Debt schemes saw a net inflow of Rs 7,826 crore (Rs 78.26 billion) as against Rs 5,114 crore (Rs 51.14 billion) in the previous month. Off the total sales of Rs 19,311 crore (Rs 193.11 billion), Rs 1,475 crore (Rs 14.75 billion) was collected from two open-ended, and Rs 7,771 crore (Rs 77.71 billion) was collected from 25 close-ended debt NFOs, while Rs 10,065 crore (Rs 100.65 billion) was collected from existing debt schemes.

The mutual fund industry witnessed a net inflow of Rs 11,335 crore (Rs 113.35 billion) as against Rs 20,302 crore (Rs 203.02 billion) in July. Total assets managed by the mutual fund industry soared by Rs 19,949 crore (Rs 199.49 billion) or 6.5% to Rs 307,108 crore (Rs 3,071.08 billion) in August, as against Rs 287,159 crore (Rs 2,871.59 billion) in July.

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