As markets rally, mutual fund investors still in wait and watch mood …

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Redemption pressure has come down but no fresh investment is coming in equity mutual funds despite markets scaling new highs.

Inspite of Indian equity markets touching new highs and every other AMC launching new equity fund, mutual fund investors are yet to find any convincing reasons to participate in market. SEBI data shows that equity mutual funds saw net outflow of Rs. 9,269 crore in FY 2013-14.

While the recent rise in markets has led investors to cash out, financial advisors say that pace of redemptions has subsided. Typically, investors invest when the market is at its peak. But, this time, even after markets scaling new high, investors are in a wait and watch mood.

Equity funds lost close to 40 lakh folios last year, The mutual fund industry lost close to 40 lakh folios in equity funds in FY2013-14, shows the latest SEBI data. Fund officials attributed the decline to redemptions and folio consolidation.

As on FY21013-14, there were 2.91 crore equity fund folios, down from 3.31 crore the previous year. Some investors have consolidated their investments within the same fund house under a single folio. The drop in folios is also a factor of redemptions. The regulator is not allowing fund houses to launch similar looking schemes due to which lot of AMCs launched closed end funds.

The industry’s average assets under management increased by 13% from 7.94 lakh crore to Rs. 8.96 lakh crore largely on account of inflows in debt funds. Investors poured in Rs. 63,339 crore in debt funds. This is reflected in the growth in debt folios which increased by over seven lakh from 61 lakh in FY12-13 to 68 lakh in FY13-14. Lot of investments has moved to FMPs which were highly attractive when the yields were hovering around 9.50 % to 10% during September 2013. A lot of FMPs were launched in March.

Gold ETF folios also declined by 66,556 as they delivered negative returns. Thus, Gold ETFs are losing sheen as people are preferring to invest in physical gold.

The industry’s total folio count dropped by 32 lakh from 4.28 crore in FY2012-13 to 3.95 crore in FY2013-14.

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