Online trading volumes of mutual funds (MFs) continue to remain bleak if the numbers are anything to go by. According to the data available on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) websites, NSE has received a total of 309 orders worth Rs3.26 crore while BSE StAR MF has received 483 orders worth Rs6.74 crore, a total of 792 combined orders between 8 December 2009 and 12 January 2010.
The subscription orders received by NSE and BSE were 208 (Rs2.64 crore) and 346 (Rs3.72 crore) respectively for the same period. Surprisingly, BSE recorded 137 redemption orders worth Rs3.02 crore while NSE received 98 redemption orders worth Rs0.61 crore. The main reason behind introducing online trading of MFs was to increase retail participation, but the story here is totally different as we are getting to see more redemptions than subscriptions in terms of value.
Currently out of 37 Asset Management Companies (AMCs), only 10 AMCs are registered with NSE so far while 11 are with the BSE StAR MF platform. Although these AMCs are registered in both these exchanges, their entire set of schemes are still not been made eligible to trade.
Just to get a sense of how inconsequential the market share of broking platforms has been, consider this: subscriptions to MFs were Rs7,76,811 crore in December 2009 and redemptions were Rs9,34,015 crore, according to provisional data from the Association of Mutual Funds in India.
Market regulator Securities and Exchange Board of India (SEBI) banned entry load charges on MF units with effect from 1st August in a bid to protect retail investor interests. This immediately led to a slump in MF subscriptions as distributors lost the incentive to sell funds.
In order to increase the reach of MFs, SEBI allowed online platforms in NSE and BSE for stock brokers to buy and sell MFs since these two exchanges already reach 1,500 towns and cities over 200,000 stock exchange terminals.
The NSE started its online trading platform for MFs on 30 November 2009 and the BSE launched its BSE StAR MF platform on 4 December 2009.