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From March 1, the domestic arm of HSBC Global Asset Management would scrap exit load, a fee on premature exits by unit holders, on all its funds, said a release.

The move, rare for any entity in the 43- member Indian MF sector, might be aimed at boosting flows into its schemes. However, it has faced criticism within the sector, as rivals feel it would encourage smaller MFs to follow.

Some also feel it would encourage trading in equity schemes, rather than in long- term investments.

In a release today, HSBC claimed it was the first asset management company to do away with exit loads from all its schemes.

The removal of exit loads makes the products more attractive to the investor, as one doesn't have to contend with the prospect of being charged a penalty for early withdrawals, owing to a genuine requirement one may have said in the release

As of December 31, HSBC managed assets worth ₹ 5,350 crore; the MF sector's assets under management were ₹ 7,86,543.6 crore.

Currently, MFs charge about one per cent exit load on equity schemes to discourage redemptions. In 2009, the Securities and Exchange Board of India (Sebi) had barred MFs from charging entry load, a fee funds charge investors to pay distributors.

Some in the sector believe the strategy wouldn't work, as distributors usually didn't sell schemes without ' upfront fees'. would attract short- term flows into the fund house's schemes. There is nothing wrong with it. Every fund is trying to find its space in the industry.

Officials at rival MFs said while large MFs wouldn't adopt the 'zero exit load' strategy, smaller ones, with negligible equity assets, might be tempted to do so.

This is against the government's and Sebi's vision to make equity a long- term product.

Investors with a short- term outlook for the market can move in and out rapidly. The impact of this on existing investors also needs to be seen.