FY15 sees number of new equity MFs beat demat account openings

India's mutual fund sector has recovered one-fifth of its lost equity investors' base post Lehman Crisis during the last financial year.

According to statistics available from the capital market regulator Securities and Exchange Board of India (Sebi), the sector added a massive 2.5 million new equity accounts taking the total to nearly 31.7 million. The month of March, alone, saw half-a-million additions.

With this, it has surpassed demat accounts as only 1.5 million new de-mat accounts were opened in the year taking the total to 23 million.

This is fairly a large addition given the rampant and continuous closures of equity folios post the 2008 global financial crisis. In all, between FY09 and FY14, the sector lost a whopping 12 million equity accounts bringing the investors' base closer to the pre-Crisis level.

However, the 2014-15 was a turning point for the industry as sentiments in the stock markets improved with a new government in New Delhi under Narendra Modi, investors kept flocking to open accounts with fund houses.

A substantial increase in new fund launches, mostly close-ended ones with higher commissions attached, acted as a big catalyst to rope in investors for a period of 3-5 years. Gross sales touched a historic high of Rs 1.5 lakh crore while inflows (net of redemptions) surpassed the previous highs of 2007-08 at Rs 71,000 crore.

The participation from investors hailing from B-15 cities and towns too was overwhelming. As per the statistics from the industry body Association of Mutual Funds in India (Amfi), accounts from these cities were almost equivalent to the urban peers.

Interestingly, there is a visible increase in pace of account additions in recent months. For instance, in March alone, industry added one-fifth of the total increase witnessed during the whole of the year.

Industry insiders say that since Amfi's deadline of commission cap was reaching fast on 1 April, fund houses tried their best to garner as much as assets as they could. There were also reports suggesting that fund houses paid advance bundled commission to distributors for next two years too to bring in more investors.

Altogether, gross sales in the equity category was over Rs 17,000 crore in March. Moreover, during the month there were 12 new equity launches gathering assets worth Rs 1,450 crore.