The Hindu Business Line : Exit spectre haunts MFs

Amidst a handful of NAVs touching all-time highs in a market that is crawling back towards its previous peak, the spectre of redemptions may start haunting mutual funds again. Fund marketers are of the view that some investors, especially those who had entered after the index had declined sharply in mid-May, are now considering an exit.

While no concrete trend has emerged yet, intermediaries report an increase in redemption requests, particularly from clients who intend to skim-off the gains that their equity funds have recorded in the recent past. The situation, they add, may assume bigger proportions if the market keeps on advancing.

Others point out that some of the money that had entered equity funds a few months ago is being shifted to less-risky categories — short-term debt products. This, it is felt, will re-enter equities once the investors feel confident again.

HNI trend

The phenomenon is mostly concentrated in HNI circles, distributors suggest, adding that a section of these investors is willing to try out an exit strategy at this stage. Their immediate provocation is the recent rise in the index levels and its impact on equity funds. Over the last three months, diversified and actively-managed funds have given over 18 per cent on average. The score is slightly higher (21 per cent) if index funds are taken into account.

"Investors have seen the indices move up. Some of them will want to get out before the sentiment changes. But this does not undermine the grounds for longer term investment," says Mr S.K. Mitra of Birla Sun Life, which runs mutual funds and insurance businesses. Some quarters, he adds, will still enter with new money, despite all the negative feelings that may be setting in temporarily. Others, like Mr Anup Maheshwari, Head - Equities, DSP Merrill Lynch MF, agree. "Some sections will continue to line up fresh allocations. They probably see little logic in exiting and entering again after brief periods," he said.

Funds peak as market revives

The buoyant stock market — the Sensex gained 45 points to settle at 12,366.91 on Wednesday — has over the past seven days propelled a few net asset values to their all-time highs, a trend that has attracted considerable attention from the distributors' fraternity.

The names that have surfaced during the past week include Reliance NRI Equity (well over Rs 22), Birla Sun Life Frontline Equity (Rs 44) and Quantum Long Term Equity (Rs 11) — all of which follow broadbased investment strategies. In the sector-specific category, Franklin Infotech (Rs 45) is the only one that has come to the fore.

Two balanced funds too have scored on this front — HDFC Prudence and BOB Children Gift.

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