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Mutual fund industry adds lowest number of investor accounts in three months in May

The mutual fund industry opened 6.12 lakh new folios in May, taking the overall folio count to 9.10 crore. It had added 6.82 lakh new folios in April and 9 lakh folios in March

June 09, 2020 / 04:39 PM IST

The mutual fund industry registered the lowest addition of folios in three months in May. The industry opened 6.12 lakh new folios in May, taking the overall folio count to 9.10 crore. In comparison, the industry had added 6.82 lakh new folios in April and 9 lakh folios in March.

However, it is notable that the number of folios has consistently been on a rise for 72 consecutive months until May.

Folios are numbers designated to individual investor accounts. An investor can have multiple folios.

According to data from the Association of Mutual Funds in India, the number of folios with 44 fund houses rose to 9.10 crore at the end of May as against 9.04 crore in April.

EQUITY

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Within the equity category, the highest numbers of investor accounts were added in large-cap funds. This category added  111,118 new investor accounts. The second highest folios in the equities were witnessed by multi-cap fund category which saw an addition of 53,549 folios during the review period.

Even in terms of inflows, this category stood in the numero uno spot. In May, the highest inflows were registered by large-cap funds of Rs 1,555 crore, followed by multi-cap funds that saw inflows of Rs 758 crore.

Fund experts said the addition of folios suggests that investors were undeterred by the market volatility. Besides, it indicates their understanding of the market risks associated with mutual fund schemes.

“In the midst of uncertainty over the possible impact of the lockdown, due to the COVID-19 pandemic, on the global as well as domestic economy, investors are looking at this scenario as an investment opportunity,” said Shahnawaz Ansari, a Mumbai-based distributor.

Amid intermittent bouts of volatility, Sensex slipped 0.4 percent last month.

Overall,  3,31,556 folios were added in the growth/equity-oriented schemes category last month.

DEBT

A total of 1,54,291 investor accounts were added in the open-ended income and debt oriented schemes category in May.

The highest number of folios was added in liquid funds,  that are used by corporate to park surplus cash. With 71,199 new folios in May, the total folio count in liquid funds rose to 19.31 lakh from 18.60 lakh.

Investors also preferred investing in gilt funds. This category witnessed the addition of 31,170 new investors. Since gilt funds' investments are made in government-backed securities, they are considered to be safe.

On the other hand, credit risk funds witnessed the highest drop of 21,405 investor accounts in May, followed by medium duration funds and low duration funds that together lost nearly 7,500 folios in the same month.

According to the AMFI data, credit risk saw outflows in May stood at Rs 5,173 crore. However, outflows fell from April when it had registered outflows worth Rs 19,239 crore.

In the month of April, credit risk funds saw massive outflows as investors felt the impact of Franklin Templeton India closing its six debt schemes, leading to a panic in the market.

Credit risk funds are debt funds that invest roughly 65 percent of the investment corpus in less than AA-rated paper. As the risk related to investing in a lower-rated paper is higher, the returns on these papers are also high.

Fund managers said the credit risk fund has been reeling under the stress of redemptions as most of the fund houses had their underlying assets deployed in highly illiquid corporate bonds.

Given the liquidity squeeze in the lower credit space of the Indian bond markets and the ensuing risk-averse environment, there was a flight to safety from investors. Consequently, investors rushed to redeem their investments from avenues that they perceived as taking a higher risk.
Himadri Buch
first published: Jun 9, 2020 04:38 pm

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