All's well that ends well, so goes the adage. However, in 2012 that remained a distant dream for India's mutual fund industry's equity segment.
The struggling sector failed to attract retail investors even in the last month of the year when optimism rose significantly higher on equity to be an outperforming asset class in the coming years.
December witnessed the second largest net selling by equity fund managers during the year as they sold shares worth Rs 2,700 crore amid redemption pressure.
Despite being a flat month when indices gained a marginal half percentage point, sector officials say, investors' request for redemptions from equity schemes continued unabated.
According to the chief investment officer (CIO) of a large fund house, no one would want to take a cash call when there are anticipations for a turnaround in the market. "So, when investors want to redeem, as they had been doing for the last two to three years, we have no alternative but to sell our holdings," he admits.
Though industry body Association of Mutual Funds in India ( Amfi) would release the monthly data of fund inflows next week, industry insiders say sales remained poor and December would not be any better than the previous months.
In a year that saw the country's benchmark stock indices give returns of over 25 per cent, the mutual fund industry remained a net seller in a rising market. Rather, in the October-December quarter, the sale of shares only intensified as the fund industry sold equities worth Rs 7,615 crore.
During the full year, equity managers sold shares worth Rs 17,955 crore.
"Unfortunately, in last year's rally domestic investors did not participate," adds the CIO. According to statistics available from the Securities and Exchange Board of India ( Sebi), till November 2012 the industry had lost over three million equity folios.
The national sales head of a private bank-sponsored asset management company ( AMC), says, "The equity segment remained a big problem. Purchases remained poor compared with redemptions. But, I believe as the situation improves, retail will come back."
Net outflows from pure equity schemes stood at Rs 9,370 crore till November, which during the corresponding period in the previous year was in positive territory with net inflows of Rs 3,236 crore.
This is despite the fact that several schemes, including banking equity schemes, FMCG schemes and pharma schemes among others, outperformed the benchmark indices during the year. For instance, schemes which primarily invest in banks and FMCG companies gave returns of over 50 per cent during the year while those of pharma-related schemes rewarded investors with over 30 per cent returns.
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'I made my money by selling too soon.'
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