Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Fixed Income

Retail Investors Are More Interested in Debt than Equity, Investor Count Falling Since 2009

Since 2009, retail individual investors seem to have lost interest in mutual funds. AMFI data shows the total number of folio numbers to have reduced 10% since 2009, down to 3.3 crore folios.

Note: The listed folios are under the headings of “Retail” and “High Networth Investors”. HNIs are those that have more than Rs. 500,000 in mutual funds, which is low enough to be called “Retail”.

Number of Total Mutual Fund Folios: Capital Mind

This data is revealed half-yearly, and the latest was on March 31. Many mutual funds have been trying to remove inactive folios and merge others so there is a lot of duplication here, however the impact can’t be much.

From a money perspective, mutual fund assets (retail+HNI) have grown since 2009.

Total Mutual Fund Money Managed (Retail+HNI) : Capital Mind

The growth rate seems to have tracked the stock market indexes, which have doubled since 2009, meaning that new money isn’t really coming in? Actually it’s worse – money has been leaving equity funds.

Interestingly, Individual investors now have more money in debt funds than equity funds for the first time since reporting started.

Retail Money in Types of Mutual Funds

Of course, most of the debt money in with HNIs, but this means the tide is starting to turn. It makes a lot of sense for individual investors to put money into debt funds in an interest rate+inflation cycle that guarantees nearly 9% tax free returns.

But this data tells you: even though the market is about 50% higher than September 2009, and most retail assets are in equity oriented funds, equity fund assets are lower now. Which means retail investors have pulled out money and the assets remain high purely because markets have grown.

What will it take to get investors interested in funds again? Please don’t ask for the return of high commissions.

  • charles says:

    ……without better corporate governance equity is a strict no no for a layman. and in any case eps growth of most stocks over 5 years is less than.debt returns in the period. Sensex went up because fiis hammered in money into.select counters like hdfc. Playing.indian stocks is abt predicting fii flows …its not abt fundamentals. A retail investor is better off in debt than trying to outhink fiis

  • Px says:

    Who will take risk if they get a 9% post tax return on debt MFs …? Sensible to lock in profits and switch to debt mfs !
    KYC burden, over taxation, over zealous tax officers, demat charges and profits drying up due to poor quality of earnings, govt apathy mixed with fire sale of govt cos to meet disinvestment targets, while not considering the piled up losses of small investors in them and expectations of poor performance due to govt policy paralysis, depreciating rupee and weak global environment can all be blamed !

  • PolicyParalysis says:

    Retail Investors bought NTPC in FPO @ 204 in 2010. They came back with OFS in 2013 @ (~)145.
    NHPC IPO at 36 in 2009. Half its price in 2013 (after 4 years). They still want OFS.
    Same fate to Hind Copper, NMDC.
    Is there any trust left in the GoI ? Why should any investor put money in any divestment program , who knows GoI will be hungry to sell stake even if it reaches half the value ?
    Can SEBI drag GoI to court for cheating INDIAN retail investors ? !!

  • Alok says:

    Dear Deepak,
    For more clarity on Fund flows, one can look at the net flows. Data released by AMFI every month. Just to give a hint – Ever since Dec 2007 (till May/June 2013), more than Rs. 1.6 trillion has flown into Income Funds (read debt funds), more than Rs. 60000cr has flown in Liquid/money market funds, more than Rs. 8000cr has flown in Gold ETFs. Not surprisingly though, less than Rs. 3000cr has flown in domestic equity funds. Some food for thought. Indian investors (whether HNI or retail) have flocked largely to debt and almost shunned equities (the flow into equity funds also includes ELSS, a tax saving instrument). Recently read an article where somebody was making case for US equities citing that flows in US bond funds was 33 times more than that in US equity funds in a similar period post the GFC. In India, the figure is 55 times! Disclaimer – i am not trying to make a case for Indian equities.

  • Ayyar says:

    gone are those days when many midcap stocks ran up 300 to 500% in 1 yr, e.g. HOEC, orbit corp, titan, essar oil, india cemt, etc….everyone wanted to become Mr. Buffett….2006 – 2008…all were happy, brokers, govt, exchanges, and the poor investor…..brokers were making heavy brokerage, govt collected taxes, investor made profits…..but then the glass bubble crashed…..except the investor all made money even later…the poor investor was left licking his wounds…all his money gone….now all of them have gone…..it now just F&O trades….very low delivery based trades…..cash trade vol in BSE/NSE is at it’s lowest…..reason….lost trust…and a good cool 9% in FDs and Debt funds rtn….+ the capital and interest is safe…in stocks….the capital is always at risk…forget the rtn on them…..