Demonetisation nearly wipes out MF equity gains

Suresh P Iyengar Mumbai | Updated on January 16, 2018


Mutual funds report a fall of 3.3% in equity market assets

The tumultuous bourses over the past two months have almost wiped out the gains made by the mutual fund industry in the equity market in the last one year.

The sharp fall in stock prices post-demonetisation of high value currencies resulted in mutual funds reporting a 3.3 per cent decline in equity market assets for the first time in nine months in November.

The assets under management of mutual funds in equity schemes was down ₹16,000 crore to ₹4.68 lakh crore in November.

The net inflow into equity schemes in the first 11 months of this year has halved to ₹36,585 crore against ₹63,947 crore in the same period last year.

The downtrend in equity-oriented mutual schemes would have continued in December as there has not been much turnaround in market performance. In the last two months, the benchmark index has lost a whopping 1,304 points as Sensex closed at 26,626 on Friday, against 27,930 logged on October 30. In the last one year, the bellwether has gained just two per cent while it is down 873 points compared with the level of 27,499 logged in 2014.

Navneet Munot, Chief Investment Officer, SBI Mutual Fund, said with the equity markets being flat for the last two years and fixed income delivering better returns overall, fund performance has been decent in relative terms.

“The growth in the mutual fund industry would have been much faster if the KYC (know your customer) norms are simplified,” he said.

Jinesh Gopani, Head of Equity, Axis MF, said the market valuation took a beating due to a spate of events such as global commodity meltdown, Brexit and recent demonetisation in India. Despite this, he said the industry saw huge inflows across categories, reflecting the increasing participation.

Since demonetisation of currency, the market witnessed risks and volatility leading to drop in economic activity, said Gopani.

Published on December 30, 2016

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