Public sector banks eat into share of equity mutual fund sales   

July 23, 2010

 There is a subtle change in the way mutual funds are being sold

Public sector banks are attracting more investor money into equity funds through their large network of branches, post the ban on entry load. Though private banks still lead in total market share, they are falling behind their public sector counterparts.

According to a Boston Consulting Group (BCG) & Computer Age Management Services (CAMS) study, public sector banks contributed 2% of the total equity fund inflows between January-July 2009. This jumped to 5% in the first quarter of 2010.

On the other hand, gross equity inflows from private banks have remained stagnant at 29% in August-December 2009 and January-March 2010 after having declined from 31% in the January-July 2009 period. The largest share of inflows in the first quarter of this fiscal was still from private banks (29%), followed by large Independent Financial Analysts (IFAs) at 19%, national distributors (11%), distributors with online presence (11%), direct channels (10%), regional distributors (10%) and public sector banks (5%). Medium-sized IFAs and small IFAs contributed 5% and 1% of the equity inflows, respectively.

Public sector banks started selling mutual funds only recently. Many private and foreign banks were already selling mutual funds through their branch networks and relationship managers.

"Distributors are not aggressively promoting mutual fund products. Agents of national distributors have not been incentivised properly. There has been some awareness among investors investing online. State Bank of India (SBI) is aggressively selling mutual funds," said RL Narayanan, vice president - equity & institutional sales, Bonanza Portfolio Ltd.
SBI, India's largest public sector bank, has trained 18,000 employees to pass a mandatory Association of Mutual Funds in India (AMFI) exam, making it one of the largest distributors of mutual funds.

Asset management companies (AMC) which sold funds directly through their offices or from their online channels have seen a marginal increase from 9% in August-December 2009 to 10% in January-March 2010.

Large IFAs - who have AUM (assets under management) exceeding Rs1 crore - pulled in 16% of equity fund investments between January-July 2009 which rose to 19% in August-December 2009. Their pie has remained intact in the first quarter of 2010 at 19%. There are around 1,00,000 IFAs registered with AMFI.

Equity inflows from national distributors have shrunk to 11% in January-March 2010 from 12% between August-December 2009 after market regulator Securities and Exchange Board of India (SEBI) abolished entry loads in August 2009. National and regional distributors have their own sales force, offices and online channels; independent IFAs lack these resources.

The first quarter of 2010 saw the launch of equity funds like Axis Equity Fund, Bharti AXA Focussed Infrastructure Fund, Fidelity India Value Fund and Sundaram BNP Paribas Select Thematic Funds - PSU Opportunities. There were 307 equity schemes in the first quarter of 2010 with AUM of Rs19,063 crore. Equity funds witnessed an inflow of Rs478 crore in the first quarter of this fiscal. —Moneylife Digital Team