Mumbai, March 21: If there’s a letter that spells recovery for the mutual fund industry, it’s U.

The MF industry ground caved in seven months ago when the regulator scrapped entry loads for schemes — a big and easy revenue grosser for the asset management companies, a part of which they shared with the distributors who hawked their schemes.

But with the robust economic revival and the claw back on the stock markets, the moolah has started flowing back into the business, raising visions of a U-turn in its fortunes.

This optimism is not solely based on data for January and February, which showed net inflows into equity schemes. Industry mavens contend that both distributors or independent financial advisers and investors are slowly adapting to the changed conditions, and distributors are now beginning to aggressively push various mutual fund schemes to their customers.

“There has been a pickup in mutual fund sales, especially in equity schemes. The industry has witnessed positive net sales in January and February. The contribution from distributors has been positive as well,” says A. Balasubramanian, CEO of Birla Sun Life Mutual Fund.

Data available from the Association of Mutual Funds in India recently showed net inflows into equity schemes for the month of February rising to Rs 1,514 crore, up from Rs 980 crore in the preceding month. The month also saw inflows of Rs 6,365 crore in all the schemes.

Income schemes are seeing the biggest fund inflow at Rs 4,887 crore.

Last August, the Securities and Exchange Board of India (Sebi) barred mutual funds from slapping an entry load on investors. This charge was used to meet marketing and distribution expenses.

With the incentive gone, distributors stopped pushing mutual funds and sparked heavy redemptions between August and December last year.

“The net outflows from the equity schemes would be in the region of Rs 7,000 crore during this period,” says an industry expert.

The confidence has started to creep back into the mutual fund industry. Says Jaideep Bhattacharya, chief marketing officer at UTI Mutual Fund, “The curve is again going up. Not only have distributors now come back to sell mutual funds, there is also a pull for the product as many investors are keen on mutual funds. Thus, there is a push and a pull even as distributors are reworking their business models and looking to improve efficiency.”

Analysts say the stock market has started to show positive returns this year and that has cranked up investor interest in equity schemes.

The Union Budget 2010-11 has also sent out positive signals to the market.

Dhirendra Kumar of Value Research expects more inflows into equity schemes in the months ahead.

“The stock markets have improved and many investors have made up their losses,” he adds.

Rajesh Krishnamoorthy, managing director at iFAST Financial India Pvt Ltd, which offers a mutual fund distribution platform for investors and independent advisers, points out that conditions have improved since January given the tax-saving season.

Krishnamoorthy, who interacts with advisers throughout the country, acknowledges that he has come across “a good set of advisers who have again started actively dealing with their clients”.