Net collections by Indian stock funds turned negative for the first time in four months in August, a month after the market regulator banned entry fees by mutual funds, limiting their ability to pay distributors.
The Securities and Exchange Board of India in July directed mutual funds to abolish front-end or entry fees from August 1, a move aimed at cutting costs for investors and to discourage aggressive selling.
However, the step has irked distributors, who bring more than 90 percent of the business to money managers and have threatened to stop selling mutual funds, given the potential loss in fees.
"Under the new norms, distributors are no longer likely to get higher commission from AMCs and, therefore, mutual fund business, especially sale of equity funds, has become an unattractive proposition," said Chintamani Dagade, a senior research analyst with Morningstar.
He said equity markets trading at higher levels would have also held investors back from investing.
Indian stock funds recorded a 1.18 billion rupees net outflow in August, the sharpest monthly decline in 2009, after three straight months of robust flows on back of a strong rebound in domestic shares.
Inflows into existing funds dropped by more than a third to its lowest since April.
The Securities and Exchange Board of India in July directed mutual funds to abolish front-end or entry fees from August 1, a move aimed at cutting costs for investors and to discourage aggressive selling.
However, the step has irked distributors, who bring more than 90 percent of the business to money managers and have threatened to stop selling mutual funds, given the potential loss in fees.
"Under the new norms, distributors are no longer likely to get higher commission from AMCs and, therefore, mutual fund business, especially sale of equity funds, has become an unattractive proposition," said Chintamani Dagade, a senior research analyst with Morningstar.
He said equity markets trading at higher levels would have also held investors back from investing.
Indian stock funds recorded a 1.18 billion rupees net outflow in August, the sharpest monthly decline in 2009, after three straight months of robust flows on back of a strong rebound in domestic shares.
Inflows into existing funds dropped by more than a third to its lowest since April.
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