The National Stock Exchange (NSE) recently extended the existing fee waiver on mutual-fund transactions till March 31 next year to encourage more buying and selling of schemes through its platform. But, asset management industry officials and brokers remain sceptical about the potency of such steps to drive this platform, where investors can buy and sell schemes just like shares, as an alternative investment route for mutual fund investments.
"The fee waiver is a very small step. For this platform to be a success, it requires greater efforts from mutual funds and brokers to consider it as the the most sought-after route," the head of a Mumbai-based brokerage's wealth management arm. "Even today, mutual funds continue to keep distributors in good humour to sell their schemes rather than find an alternative plan," he added.
The platforms were introduced by stock exchanges in December after distributors stopped selling most mutual fund schemes following the Sebi's step to ban AMCs from using investors' money to pay distributors.
Over seven months after its launch, the activity on NSE's platform for mutual funds is yet to pick up. In June, 832 orders worth around Rs 5.8 crore were placed through NSE's platform compared with 1,079 contracts worth Rs 4.47 crore in December. The activity on BSE's platform has seen a slight spurt in July, with around 1,860 orders worth Rs 16.7 crore so far this month. In June, 884 orders worth Rs 15 crore were carried out on the BSE, compared with 739 contracts valued at around Rs 18.5 crore in December. The mutual fund industry saw redemptions worth Rs 1,19,449 crore in June.
"There is a huge scope for this platform. But for that, mutual funds need to approach brokers instead of just focussing on distributors," said Sanjiv Shah, executive director, Benchmark Asset Management, which mostly offers ETFs that can only be bought and sold on exchanges through stock brokers.
Though brokers publicly maintain there is scope for selling mutual fund products, most of them, in private, are less enthusiastic. This is because brokers earn a majority of their revenues from regular trading of stocks by clients, while mutual funds schemes cannot be bought or sold in the same manner as shares. Due to lack of clarity about revenues from this business in the foreseeable future, most brokers are unwilling to invest in a big way to service mutual fund trades.
Retail investors also do not have any incentive to choose stock brokers over distributors at this juncture. This is because buying or selling mutual funds through stock exchanges requires opening a demat account and many mutual fund investors do not have one. Also, there is no cost advantage for investors who purchase mutual funds schemes in smaller numbers, mutual fund officials said.
But, some in the industry are a lot more optimistic about the platform's prospects. "There will be a tipping point sometime, but I don't know when... maybe a couple of years later or even sooner," said Benchmark's Shah.
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'I made my money by selling too soon.'
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