Wealthy re­treat­ing from PMS schemes

■ Re­demp­tions add to stock volatil­ity

Deccan Chronicle - - Financial - ASH­WIN J. PUNNEN

Wealthy In­di­ans seem to be los­ing faith in their port­fo­lio man­agers, as most schemes have given neg­a­tive re­turns fol­low­ing the rout in small- and midcap stocks.

Port­fo­lio man­age­ment ser­vices (PMS) that mainly carter to high net worth in­di­vid­u­als (HNIs) are fac­ing re­demp­tion pres­sure, as in­vestors are pulling out money from the schemes.

An anal­y­sis shows that top port­fo­lio man­agers were caught on the wrong foot in the small- and midcap space, with nine of the

10 best-known names in the in­dus­try los­ing money. These PMS schemes are show­ing neg­a­tive re­turns rang­ing from 20-35 per cent for the past one-year pe­riod. An­a­lysts say the huge sell­ing seen in mi­dand small-cap stocks in the re­cent past has mainly been due to of­fload­ing of stocks by port­fo­lio man­agers to deal with the re­demp­tions.

Man­ag­ing as­sets worth

`29,400 crore (about $4.3 bil­lion), PMS schemes de­liv­ered an av­er­age 20 per cent neg­a­tive re­turn in the last one year. Most funds have un­der­per­formed the bench­mark with a huge mar­gin as their bets have gone sour.

“PMS schemes are show­ing neg­a­tive re­turns fol­low­ing the sell-off in small- and mid-cap seg­ment. Now in­vestors are pulling out money from these schemes, as they want to cut losses,” said an an­a­lyst with a lead­ing bro­ker­age firm.

“These fund man­agers are now of­fload­ing stocks to meet re­demp­tion pres­sure, adding to fur­ther weak­ness in the small- and mid-cap seg­ment,” he said. Small-cap stocks have got a se­vere beat­ing over the past one year. The BSE Small-Cap In­dex is down around 26 per cent over the past one year.

Small-cap stocks are highly volatile than their larger coun­ter­parts and have higher down­side risk, but they do have the po­ten­tial to de­liver su­pe­rior re­turns if the stock mar­ket per­forms well, an­a­lysts said. “You should in­vest in small-cap funds for the long-term and the al­lo­ca­tion should be in line with your risk ap­petite,” they added.

An­a­lysts said the big worry for the mar­ket is ris­ing re­demp­tion by do­mes­tic in­vestors in the re­cent past, which is keep­ing the mar­kets on edge.

Re­cent data from mu­tual fund body Amfi shows net in­flows into eq­uity MF schemes have hit a 24month low, with only

`6,158 crore ac­cru­ing in Jan­uary 2019.

Un­re­lent­ing volatil­ity in the stock mar­kets and the po­lit­i­cal un­cer­tainty seem to have im­pacted in­vestor sen­ti­ment and re­demp­tions are on the rise. In Jan­uary, MFs saw re­demp­tions of `11,397 crore, up from `11,234 crore in De­cem­ber.

The volatil­ity, ex­perts say, stems from the tur­moil in the fi­nan­cial mar­kets last year and un­cer­tainty over the gen­eral elec­tions due in AprilMay.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.