Retail investors are using the recovery in the stock market to book profits, and seem to be pulling out money when the market is on a high.
Data from the Association of Mutual Funds in India (AMFI) shows that the number of folios of retail investors in equity schemes of mutual funds fell by 8% to 35 million at the end of September 2012 against 38 million at the end of September 2011.
The 30-shares Bombay Stock Exchange (BSE) sensitive index- Sensex jumped 14% during September 2011 to September 2012.
The Sensex, which had closed at 16,454 on September 30, 2011, surged to 18,762 at the end of September 2012, showing a hefty gain of over 2,300 points.
"These individuals might be from that class of investors who had entered the market in 2007 or in early 2008 when the stock market was at its high," said Lalit Nambiar, fund manager and head of research at UTI AMC.
"Sometimes even investors, whom we would consider seasoned, make the mistake of getting impatient. They try to time the market and pull their money out," he said.
Even in the last six months (January to September 2012), retail investors have shown their impatience as equity schemes witnessed a 2% fall in the folio of retail investors.
"Retail investors had been unnerved by the decline in equity market after 2008. A recovery in equity market has provided them opportunity to make profit of their investment," said Debasish Mallick, managing director and chief executive officer, IDBI Asset Management.
"We expect 2013 to be better year for equity market. If the rally in equity market is sustained then we may see retail investors coming back," he said.
However, Asset Under Management (AUM) of equity schemes increased to Rs. 1,30,153 crore in September 2012 from Rs. 1,19,448 crore in September 2011.
"The increase in AUM is because of overall rise in equity market," said Mallick.