The crashed equity market has seemed to give a lesson to investors who have started putting money in trickles in the form of SIP along with lump sum investments, predominantly in Equity Funds, Balanced Funds and ELSS. In totality, there was a total inflow of Rs. 1,942 crore in Equity Funds followed by Rs. 210 crore in Balanced Funds and Rs. 44 crore in ELSS in the month of Aug 2011. The current inflows are a major boost to the ailing industry as the market nosedived more than 8 per cent in Aug 2011. It shows the maturity level of retail investors as they are now looking to equities. In the same period last year (Aug-10) and last month, the Equity Fund saw a net outflow of Rs. 2,890 crore and Rs. 729 crore respectively.
In contrast, the industry AUM declined to Rs. 6,96,738 crore, a drop of Rs. 31,449 crore or 4.32 per cent over the month. The Liquid/Money Market instruments and Income Funds which together control a major chunk of total AUM are responsible for the erosion in AUM; moreover, the other reason is also due to poor performance of the equity market which led to fall in Equity AUM by 6.94 per cent. Similarly, the other equity categories like ELSS and Balanced also witnessed a drop in AUM by 7.91 per cent and 6.09 per cent. The allocation to Mutual Funds by banks dropped marginally from Rs. 70,532 crore in July 2011 to Rs. 69,619 crore in Aug 2011. The advance tax flows requirement may see many banks redeeming their investments in Sep 2011. This figure is likely to fall by Mar 2012 as per the restrictions put by RBI where investments in Mutual Funds are allowed up to 10 per cent of their net worth.
Other categories which saw a decline in AUM are Gilt (1.63 per cent), FoF investing Overseas (2.01 per cent), and Other ETFs (13.83 per cent). However, the Gold category continues to see the inflow and an increase in AUM.
Net Outflows in Aug 2011
Though there was a net inflow in Equity Funds, there was a net outflow overall. In totality, the total outflows were to the tune of Rs. 14,597 crore, mainly caused by outflows in categories like Income Funds (Rs. 6,925 crore), Liquid (Rs. 10,066 crore), Gilt (Rs. 86 crore), other ETFs (Rs. 147 crore) and FoF investing overseas (Rs. 63 crore). The categories which saw inflows are Equity (Rs. 1,942 crore), ELSS (Rs. 44 crore), Balanced (Rs. 210 crore) and Gold ETFs (Rs. 494 crore).
Gold ETF continues to see inflow and increase in AUM too. In last 28 months, it did not see any outflow except at one occasion when it saw a marginal outflow of Rs. 6 crore. In totality, it saw a total inflow of Rs. 4,728 crore in last 28 months. In Aug 2011, it saw a total inflow of Rs. 494 crore; also its net assets increased to Rs. 7,578 crore in Aug 2011 from Rs. 6,119 crore in July 2011. The subdued equity performance and weak dollar globally has prompted investors to invest in Gold which provides hedge against inflation.
FMPs still rule the inflows; Equity NFOs dried
We continue seeing new FMPs in the street. In Aug 2011, a total of 44 FMPs has been launched collecting a total AUM of Rs. 5,490 crore, a marginal increase over the last month collection of Rs. 5,090 crore. Around 14 fund houses launched FMPs in tenures ranging from 3 months to 2 years. Edelweiss Mutual Fund launched Edelweiss Select Mid Cap Fund which collected a total corpus of Rs. 6 crore.
Happy Investing!
- Amar Ranu
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