If the number of draft offer documents filed with Securities and Exchange Board of India (SEBI) is any measure, mutual funds (MFs) seem particularly cheerful despite stricter new rule on entry load.
Market players say AMCs are on a high, thanks to renewed retail investor interest in equity, flow of new money and maturing of fixed deposits where wary investors had parked their funds during the recent trough.
MFs’ offer documents filed with SEBI rose 32-fold between August and September 18 from a single document filed in the seven months to July, 2009. September alone saw 22 offer documents being filed.
“This has to be because of the up move witnessed in markets and improvement in the economy. Fund houses now foresee higher retail investor interest,” said Apurva Shah, VP and Head of Research — Institutional Equity, Prabhudas Liladhar.
Though it appears that the downturn is behind, figures indicate that the market rally was initially not spurred by retail participation. There was no new money flowing into the market.
“The old money had depreciated during the downturn and investors were shying away from investing. Now, with people recovering losses made during the slowdown, they are eager to participate in the rally and invest in equity and Mutual Funds,” said Gopal Agarwal, Equity Head — Mutual Fund, Mirae Asset.
“Also, high-cost fixed deposits, in which investors had parked their funds during tough market conditions, are now going to mature and would flow to mutual fund and equity market,” said Agarwal.
Shah feels that the new SEBI norm on entry load would stem the flow of old money, as distributors would not see any incentive in channelling it into mutual funds.
Indian economy is perceived as resilient, and its cyclical nature of downturn attracts foreign institutional investments, said Agarwal, adding: “Both internal and external factors are in favour of Indian economy and markets. That is why, despite stricter norms by SEBI, MFs are buoyant.”