Volatility takes toll on gold ETFs; MF retail folios drop 8% in H1

The volatility in the stock markets has begun taking its toll on gold exchange traded funds (ETFs) for the first time, even as mutual funds lost a record 8 percent -- or nearly 35 lakh -- retail folios over the six months ended September 2013. This is the sixth straight half-yearly decline in MF folios, according to Association of Mutual Funds in India (AMFI) data.

However, high net worth individuals (HNIs) cushioned the sharp fall in folios, with the gain in HNI folios restricting the overall fall at 15 lakh folios. The MF industry has 4.13 crore folios.

Volatility in the stock markets has begun taking its toll on gold exchange traded funds (ETFs) for the first time. Reuters.

Volatility in the stock markets has begun taking its toll on gold exchange traded funds (ETFs) for the first time. Reuters.

According to analytics firm CRISIL, the volatility in the markets caused the sharp decline in retail folios, which was seen chiefly in the equity category. The CNX Nifty rose just one percent in the past six months, and declined 3 percent in the calendar year until September 2013.

"Macroeconomic weakness in the domestic market coupled with some mixed cues from the global market led to the decline in the local market," CRISIL said. Balanced funds (an equity oriented hybrid category) too saw a decline of over 2 lakh retail folios over the past six months.

However, the notable effect was in the gold ETF category, where folios fell for the first time. The retail folio count fell 5 percent to 5.24 lakh during the period in question. This is in sharp contrast to a 16 percent rise witnessed in gold ETFs in the preceding six months. The volatility in the underlying asset class - gold - caused the fall as gold prices fell. The CRISIL Gold index fell over 2 percent in the calendar year till September 2013.

Debt funds rise, HNI folios shoot up

As equity and gold became choppy, debt funds continued to be the preferred option for retail investors, with such funds continuing to witness a rise in retail folios which began in March 2009. Debt funds added 1.79 lakh folios over the past six months compared to 1.69 lakh folios added in the previous six months ended March 2013, CRISIL pointed out.

HNIs, defined as individuals investing Rs 5 lakh or more, saw their folios rise three times in the first half of the current financial year led by a sharp rise in equity folios. Out of the 30 lakh HNI folios, 21 lakh were added in the latest half year period. In the category, the equity segment added over 14 lakh folios followed by balanced funds and debt oriented funds, which added 3.45 lakh and 2.72 lakh folios in the past six months.

For MFs, garnering a larger share of retail investors is continuing to be a challenge, with corporates dominating MF assets under management (AUM). Corporate entities had a substantial 49 percent share of MF AUM in September, up from 46 percent in March. HNIs had a 30 percent share (up from 28 percent), while retail share actually fell to 19 percent from 23 percent in March.

Updated Date: Dec 21, 2014 00:50 AM

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