MFs on roll as 1HFY00 collections surpass FY99
Oct 06, 1999

Author: PersonalFN Content & Research Team

Mutual fund (MFs) collection figures released by the Securities and Exchange Board of India (SEBI) reveal that MFs clocked collections of Rs 210 bn in 1HFY00, which is marginally lower than the amount they collected in whole of last year.

Gross collections posted by MFs over the period April-September 1999 amounted to Rs 210 bn, which is just shy of the Rs 227 bn figure last year. The net inflow (sales less repurchases) in the first six months of the current year is also higher at Rs 67 bn (Rs 10 bn in FY99). This seems to indicate that while on the one hand investors investing in MFs has increased significantly, on the other hand, investors exiting from MFs has also declined by a large percentage.

Several factors are responsible for increased investor interest in MFs over the past 12 months. The main factor that has influenced investor perception is the tax sops offered to the MF investor in the last budget. Dividends from MF schemes were made tax-free in the hands of investors and tax breaks were offered to equity-oriented balanced schemes.

Another factor that has fuelled demand for MFs is the improved performance of the stock markets. While earlier pharma, software and fast-moving-consumer goods (FMCG) stocks lead the stock market rally, later on, even the cyclicals (cement, commercial vehicles, metals), media and housing stocks started posted encouraging gains.

Rising investor inclination towards MFs can also be attributed to the fact that rich valuations of software, pharma and FMCG stocks have put these companies beyond the reach of the average retail investor. Investors who wish to participate in the rising fortunes of software, pharma and FMCG companies prefer to route their investments through MFs, which are more 'affordable'. In fact, after witnessing the large inflows, several MFs have launched dedicated pharma, software and FMCG funds.

Finally, innovative products and services like gilt funds, balanced funds, systematic investment plan and monthly income plans, have invoked investor interest and have increased the options at his disposal.

However, investor frenzy is not evenly spread across the MF segment. UTI and bank-sponsored MFs have lagged behind, while their private sector counterparts have stolen a march over them, despite entering the fray only a few years ago.