Even though mutual funds and life insurance companies say that investors are pouring money into various plans, despite the market meltdown, several broking agencies and distributors are saying their commission income has slid by 15-25% in January in comparison with the corresponding period last year. The apparent contradiction could only mean one thing: investments in these segments have slowed compared with the year-ago period.
For broking houses and distributors, the first three months of the calendar year tend to be the most crucial for sales because half of their annual commission income is earned during the tax planning season.
“Given the market meltdown, the sales figures of mutual funds and life insurance products in January have come down considerably in comparison with the last year,” said D. K. Aggarwal, director of SMC Global, a New Delhi-based broking house.
Rishi K. Chopra, vice-president (finance) of Alankit Assignments Ltd, a New Delhi-based broking house, agreed.
“People have adopted a wait-and-watch policy,” Chopra said. “They don’t want to invest in mutual funds and unit-linked insurance products (Ulips) for sometime because of sharp ups and downs in the stock markets.”
It’s not easy selling products any more, said the branch head of a New Delhi-based broking house, who didn’t want to be named. “Investors want to keep away from equity-related products for sometime because of huge losses they suffered in the last one month,” he said. “With many retail investors pulling out of the markets, there is a small bunch of investors left whom everyone is trying to chase for investments.”
Not everyone in the business buys the argument though. “There is no co-relation between Ulips and market conditions because life insurance usually is purchased for a 10- 15-year period,” said Anil Chopra, chief executive and director of Bajaj Capital Ltd, a New Delhi-based non-banking financial advisory firm. “In addition, investors have viewed the market meltdown as an opportunity to invest and that has resulted in increased enquiries and flows in ongoing schemes.”
But brokers and distributors all are united on one front—as the markets get stable in the long run, money flow also would smoothen out. “With markets rebounding, investors tend to come back to invest in mutual funds and insurance products,” said Chopra.
So, where exactly are investors parking their money if not in equity-related products? Are they invested in bank deposits or the public provident fund (PPF)?
It is too early to comment on the impact of the market slowdown because the collection figures for PPFs would come only by February-end, said a general manager of the government business department of a public sector bank, who did not wish to be identified because he is not authorized to make press statements.