Investors see an opportunity in Equity; Positive inflows in Equity MFs

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                                                                                                   

Inflows in Equity plummet in July 11; Industry AUM levitates

Indian Mutual Fund industry continues to be tumultuous with no good signs on net inflows in equity. Although the industry assets have grown by 8.17 per cent to Rs. 7.28 lakh crore, a net addition of Rs. 55,011 crore mainly contributed by the new inflows in Liquid/Money Market and Income Funds, the inflows in equity continue to show the muted performance after two quarters of positive inflows. Investors redeemed investment worth Rs. 729 crore in July 2011 in comparison to net buying of Rs. 20 crore and Rs. 1,546 crore in the months of June and May 2011. Net outflow for the year to date in Equity is Rs. 239 crore.

The bleak investment scenario in India and global headwinds especially US Political circle at loggerheads over the increase in debt ceiling and Euro’s issue of default scathed through the globe. Meanwhile the absence of spark and direction in Equity also forced the investors to shift to alternate products including fixed income funds. Investors preferred investing in accrual products as shown by Income Fund category which saw an inflow of Rs. 15,429 crore with a good chunk of money (about Rs. 5,080 crore) moving into FMPs. Also, the Liquid/Money Market category saw a net inflow of Rs. 35,699 crore as banks put back investments into it. In an earlier circular, the RBI had asked to trim the investments in Mutual Funds up to 10 per cent of their net worth as on Mar 31, 2011 by Oct 2011 which it further extended it to Mar 31, 2012. The banks’ total net worth is estimated as Rs. 3.5 lakh crore; it is expected that funds would flow out of Mutual Funds by Rs. 40,000 – Rs. 50,000 crore from the current level of Rs. 74,749 crore in July 2011.

Net Outflows in June 2011

In totality, the net inflows to the Mutual Fund industry are estimated at Rs. 51,010 crore. Interestingly, all categories saw net inflows except Gilt which lost Rs. 85 crore followed by Equity and ELSS which lost by Rs. 729 crore and Rs. 140 crore respectively.  For the year till date in 2011, the net inflow is Rs. 1,24,049 crore; in same period in the previous year, the net inflow had been at Rs. 35,201 crore.

On the positive side, the categories which saw net inflows are Balanced (Rs. 77 crore), Gold ETFs (Rs. 234 crore), Other ETFs (Rs. 384 crore) and FoF Investing Abroad (Rs. 141 crore).

Gold ETF continues to see inflow and increase in AUM too. In last 27 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. 4,234 crore in last 27 months. In June 2011, it saw a total inflow of Rs. 234 crore; also its net assets increased to Rs. 6,119 crore in July 2011 from Rs. 5,568 crore in June 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. A total of 43 FMPs has been launched collecting a total AUM of Rs. 5,080 crore. Birla Sunlife Mutual Fund launched Birla Sunlife Nifty ETF which collected a total amount of Rs. 12 crore. Around ten fund houses launched FMPs in tenures ranging from 3 months to 2 years.

- Happy Investing!

- Amar Ranu                                                                                                                                      Source: MOSL

Mutual Funds’ Net Assets dwindled in June; Equity saw a marginal inflow

After seeing few positives in recent months, Equity saw a good dip in net inflow in the month of June. The net inflows in Equity Mutual Funds dwindled to Rs. 20 crore in June 2011 from Rs. 1,546 crore in May 2011. This is the massive fall in inflows in Equity in recent months.

The uncertain domestic equity market coupled with the bleak global factors predominantly emanating from Euro region also caused Indian investors to redeem their investments out of Equity Mutual Funds and allocate to fixed income products. The domestic equity market remained in bear mood in most of trading days in June before given a boost by FIIs in the last week; thus, letting the broader indices Sensex and Nifty 50 to end in positive.

In addition, the overall Mutual Fund assets fell to Rs. 673,176 crore in June 2011 from Rs. 731,448 crore in May 2011, a fall of Rs. 58,272 crore or 7.97 per cent. Also, the industry saw a total outflow of Rs. 62,442 crore which was mainly caused by outflows in short term debt category – Liquid Funds and Ultra Short Term Funds. In total, these two categories had an outflow of Rs. 62,378 crore. Other categories which saw a net outflow are Gilt (Rs. 88 crore), ELSS (Rs. 80 crore), FOF Investing Overseas (Rs. 42 crore) and Other ETFs (Rs. 210 Crore). Only Balanced Fund, Equity Fund and Gold ETF categories saw a net inflow of Rs. 84 crore, Rs. 20 crore and Rs. 252 crore respectively.

Banks continue to reduce their investments in Mutual Funds; as on June 17, 2011, the net investments stand at Rs. 84,034 crore from over Rs. 1 lakh crore on May 20, 2011. Recently, the RBI has instructed all banks to cap their investments in Mutual Funds up to 10 per cent of their net worth as on Mar 31, 2011. Earlier, the deadline had been as on Oct 2011 which has been extended by another six months. It is being expected that investments worth Rs. 50,000-55,000 crore would flow out of the system in next six months.

Net Outflows in June 2011

The outflows continued in June 2011; barring categories like Equity, Balanced and Gold ETFs, all other categories saw a net outflow. The equity category saw a net inflow of Rs. 20 crore on standalone basis; however, if we consolidate Equity with Balances and ELSS, there has been a net outflow in totality.

On net asset basis, the MF industry AUM also came down to Rs. 673,176 crore, a fall of 7.97 per cent. The other categories which saw a major fall in assets are Liquid/Money Market (-22.36 per cent), Other ETFs (-8.25 per cent), FOF Investing Overseas (-6.2 per cent), Income (-5.49 per cent), Balanced (-4.45 per cent) and others.

Gold ETF continues to see inflow and increase in AUM too. In last 26 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. 4,000 crore in last 26 months. In June 2011, it saw a total inflow of Rs. 252 crore; also its net assets increased to Rs. 5,568 crore in June 2011 from Rs. 5,463 crore in May 2011. 

FMPs still rule the inflows

We continue seeing new FMPs in the street. A total of 74 FMPs has been launched collecting a total AUM of Rs. 7,747 crore. The new fund house Union KBC Mutual Fund launched its maiden Equity Fund, Union KBC Equity Fund which collected a total AUM of Rs. 167 crore. It also launched a liquid fund, Union KBC Liquid Fund.

Happy Reading!

- Amar Ranu

Net inflows dwindled by Rs. 48,850 Cr in May 11; Equity shows a net inflow after a lull

The lull in Equity in the month of May 11 didn’t deter Mutual Fund investors from investing in Equity Mutual Funds which showed an inflow after a brief lull. The broader indices Sensex and Nifty 50 which nosedived by 3.30 per cent approximately affected the diversified Equity AUM too which lost 1.72 per cent to Rs. 1,67,470 crore in May 2011 vis-à-vis Rs. 1,70,406 crore in April 2011. However, there has been a net inflow of Rs. 1,546 crore in Equity category in May 2011, much to the reprieve of Mutual Fund Industry which has been witnessing outflows continuously except for few occasions since the ban of entry loads in Aug 2009. In debt and other categories, net outflows were reported. The recent regulation of RBI to cap the banks’ investment in Mutual Fund up to 10 per cent of total banks’ net worth as on Mar 31 has started affecting the Liquid/Money Market category which saw an outflow of Rs. 39,603 crore in May 2011. Moreover, the Income category also reported an outflow of Rs. 11,141 crore. As on May 20, 2011, the banks’ net investment in Mutual Funds stood at Rs. 106,233 crore. It is estimated that the total net worth of the banking system stands at Rs. 3.13 which essentially means that the current investment of Rs. 1.06 lakh crore will drop to Rs. 30,000 – 35,000 crore in next six months which may impact the net flows in Income/Liquid categories.

Net Outflows in May 2011

In totality, the MF Industry AUM dropped by Rs. 53,926 crore or 6.87 per cent to Rs. 7.31 lakh crore in May 2011 from Rs. 7.85 lakh crore in Apr 2011. The categories which saw major fall are Other ETFs (-25.09 per cent), Liquid/Money Market Instruments (-17.43 per cent), Income Funds (-3.39 per cent), ELSS (-2.86 per cent), Gilt (-2.37 per cent) and Equity (-1.72 per cent). However, Gold ETF and FOF Investing Overseas lapped the AUM with a gain of 13.81 per cent and 10.83 per cent respectively. The trends of gold price continue to head for a bull run which prompts investors to invest in Gold ETFs. The table below shows the comparative flows and AUM of all major categories of Mutual Fund industry.

FMPs still rule the inflows

Perhaps FMP (Close ended Income Fund) is the only category which has been showing continuous inflows. In May 2011, there were 37 NFOs which collected a total of Rs. 7,416 crore. The burgeoning interest rates and tight liquidity in the financial system seem to remain in place; moreover, it is more likely that RBI may go for additional policy rate hike in upcoming mid-quarter review as on June 16, 2011.

New Funds enter into industry

Apart from FMPs, there were four open ended Funds in Income, Equity and Gold ETF category. While ICICI Prudential MIP 5 collected a total AUM of Rs. 27 crore, Sundaram Equity Plus garnered Rs. 134 crore in their NFOs. First of its kind, HSBC Brazil Fund collected a total amount of Rs. 313 crore in May 2011.

Unique Investors

For the first time, AMFI declared the unique investors data which clearly shows that Equity investors rule the industry. There are a total of 3.77 crore unique investors out of which 2.43 crore (65 per cent) investors belong to Equity, 72.65 lakh (19 per cent) to ELSS, 30 lakh (8 per cent) to Income, 22.29 lakh (6 per cent) to Balanced and remaining to other categories. In Gold ETFs, there are 3.87 lakh unique investors.

Outflows in Equity continued; Total MF AUM up by 32.61% to Rs. 7.85 lakh crore

The equity outflows continued in April 2011, following the market negative sentiments and the ongoing geopolitical tensions in MENA region which have skyrocketed the crude oil prices affecting the domestic inflation. In April 11, there has been an outflow of Rs. 1,076 crore for second month successively. In last one year, the equity category lost Rs. 13,348 crore. However, the total AUM in Equity grew to Rs. 1,70,406 crore, up marginally by 0.38 per cent. In other equity related categories – ELSS, Balanced and other ETFs, there were mixed signals. While ELSS showed an outflow of Rs. 289 crore, the other ETFs category showed an inflow of Rs. 510 crore. The Balance category also showed a marginal inflow of Rs. 17 crore.

Slowly and steadily, ETFs have been becoming the mass product as shown by large accumulation of assets in it. While Gold ETFs continue to grow by leap and bounds, other ETFs also grew drawing interests from retail investors. In last one year, the Gold ETFs saw an inflow of Rs. 2,319 crore while the AUM grew more than double. Its current AUM grew to Rs. 4,800 crore in Apr 2011 from Rs. 1,711 corre, up by 180.54 per cent. To some extent, the uptick in gold prices is also responsible for the growth in AUM. The gold prices rose 29 per cent in last one year.

Net Inflows in April 2011

On the comfort side, the Mutual Fund Industry AUM rose to Rs. 7.85 lakh crore, up by 32.61 per cent or Rs. 1.93 lakh crore mainly contributed by Liquid/Money Market and Income Fund Categories. In Mar 2011, the industry lost Rs. 1.15 lakh crore.  The Liquid/Money Market AUM grew to Rs. 2.22 lakh crore in April 2011 from Rs. 73,666 crore in Mar 2011, up by 201.9 per cent. There has been a net inflow of Rs. 1.47 lakh crore in this category. Similarly, the Income category also showed upward movement in net AUM including net inflow in April. The category AUM grew to Rs. 3.35 lakh crore, up by 14.63 per cent and the net inflows were Rs. 37,891 crore.

In a significant ruling to Mutual Funds in the recent monetary review, the RBI has mandated that banks should restrict their exposure to 10 per cent of their net worth as on last year in Liquid Mutual Funds. So, eventually, the investments around Rs. 50,000 crore will outflow in next 6 months.

FMPs still rule the inflows

The burgeoning interest rates on account of high inflation have made the FMP category conducive for the market. Moreover, the uncertainly in equity market which is expected to remain in near future have also led to demand from investors. In April 2011, there has been 22 FMPs collecting a total of Rs. 3,065 crore.

New Funds enter into industry; some exited

Apart from FMPs, there were three open ended Income Funds named as Axis Dynamic Bond Fund, Canara Robeco Yield Advantage Fund and Peerless Child Plan Fund which collected a total sum of Rs. 41 crore. In gilt category, Daiwa Govt. Securities Fund – Short Term Plan collected Rs. 57 crore. There were no other NFOs.

However, the number of total equity funds reduced with some AMCs merging the schemes with the other existing schemes. As against earlier of 328, the total equity funds stand at 318. JM Mutual Fund and ICICI Prudential Mutual Funds merged their schemes with other existing schemes.

Inflows to Equity continued; total inflows upped by Rs. 25,757 cr

The growth saga in Equity continues with a net inflow in Equity categories – Equity, ELSS and Balanced. The Equity category saw a net inflow of Rs. 2,495 crore, the highest inflow since July 2009. This positive figure is also for the third time in a row month-wise. However, the net assets of Equity dwindled due to fall in broader markets and outflows of foreign ‘hot moneys’. While the FIIs were the net sellers to the tune of Rs. 4,584 crore in Equity, Mutual Funds were the net investors to the tune of Rs. 1,477 crore. In totality, the Equity AUM nosedived to Rs. 1.59 lakh crore in Feb 2011 from Rs. 1.65 lakh crore in Jan 2011.

Total AUM also upped

The total industry AUM also rose to Rs. 7,07,412 crore in Feb 2011 from Rs. 6,91,080 crore in Jan 2011, a gain of 2.36 per cent. Also the total inflows were Rs. 25,757 crore in Feb 2011. The industry witnessed a strong inflow in Income Funds specially closed ended FMPs which saw 65 NFOs collecting a total sum of Rs. 17,232 crore in Feb 2011. The banks also upped its investment in Mutual Fund instruments predominantly in Income Funds and Liquid/Money Market Funds which saw inflows of Rs. 13,708 crore and Rs. 8,770 crore during the month. As on Feb 11, 2011, the banks’ combined investment reached to Rs. 95,018 crore compared to Rs. 13,483 crore in Dec 31, 2010.

New FMPs continued pouring in

The high interest rate scenario and tight liquidity in the financial system prompted Mutual Fund houses to launch FMPs which have become investors’ favorites. The tight liquidity has sent the CD/CP rates haywire crossing 10 per cent. Moreover, banks have also been building its balance sheets through subscription in Certificate of Deposits (CDs) as the financial year closes in. During the month, a total of 65 FMPs and Hybrids Funds were launched.

Other categories too saw inflows

The other equity categories such as ELSS, Balanced Funds and Other ETFs saw inflows to the tune of Rs. Rs. 348 crore, Rs. 216 crore and Rs. 480 crore respectively. The Gold ETF category also witnessed its successive positive inflows to the tune of Rs. 25 crore; lower than the last month figure of Rs. 125 crore. However, the gilt fund category and FOF investing overseas saw outflows to the tune of Rs. 271 crore and Rs. 14 crore respectively.

New Funds enter into industry

A total of 5 funds came into existence in open end category with 3 funds in Income category and 2 funds in Equity category. In close-ended category, 65 funds were launched in Feb 2011 which mostly consisted of FMPs and Hybrid Funds.

- Happy Investing!

Equity Outflows dampened; Net assets grew to Rs. 6.65 lakh crore

In 2010 YTD, FIIs have been pouring money (referred as ‘hot money’) following the continuing global economic turbulence all over and thus, in some aspects, the inflows have been providing a temporary relief to burgeoning Current Account Deficits (CAD), expected to be over 3 per cent in current Fiscal Year. On the contrary, Mutual Funds have been bleeding seeing their assets depleting rapidly, especially Equity outflows. However, in Nov 2010, the situation improved in favour of domestic Mutual Fund Industry. On an average, the total industry AUM increased to Rs. 6.65 lakh crore, up by 2.92 per cent. Since the last four months, assets had been depleting continuously. The maximum growth was seen in Liquid/Money Market where the assets grew to Rs. 99,190 crore, a growth of 15.37 per cent over the last month.

Gilt Funds, where the investments are predominantly in Government Securities have seen an increased activity where a lot of investments flew in. The AUM grew to Rs. 4,410 crore, an increase of 11.08 per cent while the total inflows were Rs. 431 crore. This is the only category which has been witnessing positive inflows for the last 6 months. The high gilt yields scenario is throwing an opportunity for investors to reap the capital gains once the yields come down on account of eased liquidity situation, low inflation and improved economic outlook.

In Equity, the outflows continued albeit at much lesser amount. In Nov 2010, it saw an outflow of Rs. 41 crore only in comparison to an average outflow of Rs. 3,523 crore in last five months. The ELSS category too continued with the net outflow. This month, the outflow had been to Rs. 62 crore. In last eight months, the category saw the redemption of Rs. 993 crore, the maximum in recent years. However, the Balanced Fund category which involves a mix of Equity and Debt investments saw an inflow to the amount of Rs. 255 crore. However, its AUM declined to Rs. 18,871 crore in Nov 2010 from Rs. 19,462 crore in Oct 2010.

ETFs continue to move unidirectional with inflows. The Gold ETFs have drawn an added interest from investors which led to an inflow of Rs. 172 crore. In last 19 months, the category witnessed positive inflows in 18 months, the maximum among all categories. In other ETFs section, the inflows continued with a major addition of Rs. 328 crore. The AUM also rose to Rs. 1,852 crore in Nov 2010 from Rs. 1,690 crore a month earlier.

In Income category, the total AUM increased by 3.99 per cent to Rs. 3.31 lakh crore. The category saw an inflow of Rs. 11,307 crore in Nov 2010.

There were no new funds launched in Equity category; however, there was an open ended Gold ETF (Axis Gold ETF Fund) and Fund of Funds investing Overseas (JP Morgan EEMA Equity Offshore Fund) launched in Nov. However, there was a flurry of Fixed Maturity Plans (FMPs). A total of 36 FMPs was launched in Nov 2010 collecting a total fund of Rs. 5,281 crore. The liquidity deficit has sent the short term yields higher which have helped the Fund Managers to lock in the opportunity in dolling out FMPs which provide tax benefits in comparison to other investment products.

Source: MOSL

Happy Reading!

Equity outflows continue; industry added Rs. 31,654 crore

Mutual Fund industry saw a temporary relief after witnessing outflows in last two months consecutively. In July 2010, the industry saw a net inflow of Rs. 31,654 crore to its kitty mainly on account of net inflow of Rs. 34,303 crore in Liquid/Money Market category. On the other hand, the total AUM increased to Rs. 6.68 lakh crore, a rise of Rs. 38,420 crore or 6.10 per cent over the last month figure. All categories except FOF Investing Overseas reported an increase in its net AUM. While Income Funds comprising 50 per cent of total AUM reported a meager increase of 1.11 per cent in its AUM, Liquid/Money Market Fund category reported an increase of 46.56 per cent. The latest AUM figures for Income and Liquid/Money Market Fund stand at Rs. 3,31,949 crore and Rs. 1,05,333 crore respectively. The Other ETFs category shows a dramatic increase in AUM after Motilal Oswal Mutual Fund successfully closed its maiden fundamentally modified ETF MOSt Shares M50 with a total AUM of Rs. 236 crore. It has a total AUM of Rs. 1,532 crore, an increase of Rs. 397 crore other its last month figure. The Diversified Equity category showed a negligible increase of 0.10 per cent to Rs. 1,78,492 crore. Other categories too moved up albeit marginally.


The Equity Diversified Fund category saw a major redemption having a total outflow of Rs. 8,413 crore against an inflow of Rs. 5,013 crore, thus, a net redemption of Rs. 3,400 crore. The equity markets have already touched their February 2008 level and investors have become cautious of overheat going in the equity market as they fear a correction from this level. Moreover, some investors who were sitting at their investment since 2007 had also redeemed their money. Hence mutual funds booked profit to meet investors’ redemption pressures. As per the latest SEBI figures, Mutual Funds had net sale of Rs. 4,405 crore in July 2010.

Table: Mutual Fund Asset Growth

The Liquid/Money Market saw the maximum inflow of Rs. 34,303 crore mainly on account of switch outs from Income/Ultra Short Term Funds to Liquid Funds. After the introduction of new MTM ruling on debt securities having average maturities more than 91 days, the Ultra Short Term Funds were the worst hit. Corporate fears that it will bring volatility to the funds which will bring down the returns. They eventually shifted to Liquid Funds or redeemed their investments. The Income category saw a net inflow of Rs. 475 crore only.


In other categories, ELSS saw a new outflow of Rs. 139 entering into fourth month having outflows consecutively month-on-month. Balanced Funds too saw an outflow of Rs. 43 crore continuing its last month losing streak. However, the industry has been witnessing a major shift since last few months from active funds to passive funds. ETFs which cater to passive funds category have seen a substantial increase in inflows. The Gold ETF and other ETFs category added Rs. 155 crore and Rs. 375 crore respectively.

The month also saw the launch of 7 open-ended NFOs and 15 close-ended NFOs (mainly FMPs). The 15 close-ended income funds collected Rs. 2,444 crore from the market while the 3 open-ended close ended funds collected Rs. 840 crore. The income category NFOs were Axis Income Saver, Canara Robeco InDiGo Fund and Peerless Income Plus Fund. The 2 open-ended Equity NFOs, mainly Mirae Asset Emerging Bluechip Fund and SBI PSU Fund collected a total of Rs. 705 crore. In other ETFs category, Motilal Oswal MOSt Shares M50 ETF collected Rs. 236 crore in its maiden NFO.

Source: MOSL Mutual Fund Desk

MF Industry saw a dip of Rs. 1.53 lakh cr; Equity also saw outflows

Indian Mutual Fund industry suffered a major jolt at the concluding month of fiscal year 2009-10. The Asset Under Management (AUM) for the month of March stands at Rs. 6,13,979 crore, a loss of Rs. 1,52,890 crore or 19.94 per cent over its last month figures. The industry saw a net outflow of Rs. 1,52,890 crore against a gain of Rs. 6,365 in the month of Feb. The Income category saw a maximum outflow of Rs. 1,64,487 crore or a loss of 34.57 per cent. Last month, this category had seen a net inflow of Rs. 4,887 crore. However, the Liquid/Money Market category has shown an improvement over its last month figures. The current month saw a net inflow of Rs. 3,971 crore. In Income Fund category, there have been net outflow as the banks have redeemed their investments from Mutual Funds following strict directives from RBI and SEBI. The major surge in Mutual Fund Industry AUM has been happening due to increased participation from banks. They have been keeping their surplus money with Mutual Funds as the credit off-take has been slow following the bleak economic. However, in the month of March, banks have reduced their Mutual Fund positions from Rs. 1,09,453 crore as on Feb 26, 2010 to Rs. 55,502 crore as on Mar 2010. In March 2009, the banks have total investments of Rs. 36,781 crore in instruments issued by Mutual Funds. Last year in Dec 2009, RBI issued a directive to all banks after banks increased their total investments in Mutual Funds to Rs. 1,69,236 crore. RBI argued that the money invested in Mutual Funds have been revolving in the system in the form of Certificate of Deposits (CDs) which banks have been placing with Mutual Funds. The category added three new income fund schemes. JP Morgan India Short Term Income Fund and Sundaram BNP Paribas Monthly Income Plan – Conservative & Aggressive were new schemes added.


On the other front, the Equity category AUM rose to Rs. 1,74,054 crore in Mar 2010 in comparison to Rs. 1,68,672 crore recorded last month, up by 3.19 per cent. However, in terms of total flows, it saw a net outflow of Rs. 2,016 crore. In the month of March, Fund Managers booked profits seeing stretched valuations of stock market. Moreover, they also distributed dividends rampantly. SEBI also banned the dividend distribution out of Unit Premium Reserve (UPR). It said that the dividend distribution amount must be from the profits booked by the scheme. Since the ban of entry loads, equity category has seen a constant outflow of its assets. However, the first two months of 2010 had seen some inflows. In fiscal year 2009-10, the equity category has seen a net inflow of Rs. 595 crore only. However, the overall Mutual Fund AUM has grown 47.13 per cent in FY 2009-10. Bharti AXA Focussed Infrastructure collected Rs. 41 crore from its NFO.

The ELSS category saw its maximum inflow in last 15 months. The category added Rs. 641 crore to its kitty. The inflows had been mainly due to tax-season month where investors put their money in ELSS to get tax rebate under Sec 80C of Income Tax Act 1961. It saw a total inflow of Rs. 1,554 crore in last one year.

The ETF category saw some major outflows in other ETFs category. While Gold ETF added Rs. 45 crore to its kitty, other ETFs category saw an outflow of Rs. 439 crore. Current the total AUM stands Rs. 957 crore, a loss of 28.69 per cent over its last month figures. Two ETFs were added to the category. Religare Gold ETF garnered Rs. 19 crore in its NFO period while Hang Seng Benchmark Exchange Traded Scheme added Rs. 55 crore from its NFO. Hang Seng ETF is the first international ETF being launched in India by Benchmark Mutual Fund.

Gilts saw a net inflow of Rs. 267 crore. Its AUM rose to Rs. 3,395 crore in the month of March 2010, a gain of 7.06 per cent over its last month figure. Given high borrowing programme, bond yields are poised to rise further. The category may saw some inflows in the months to come once the benchmark yield level reaches to 8.25 per cent to 8.5 per cent.

The industry also saw a herd of FMPs in the month of March 2010. A total of 69 schemes were launched which collectively garnered Rs. 14,642 crore. FMPs have seen a comeback after a brief lull. March sees the maximum numbers of new NFOs in FMP category as these products are launched mainly to avail the double indexation benefit, thus, minimizing the tax burden to investors on income earned.

MF Industry assets grew 51.6 per cent y-o-y

Highlights:
• Mutual Fund Industry assets grew 51.6 per cent on year-on-year basis; shrink by 4.6 per cent on month-on-month basis
• The AAUM touched Rs. 7.47 lakh crore as on Mar 2010; saw its historical high of Rs. 8.07 lakh crore in Nov 2009
• Reliance Mutual Fund (Rs. 1.1 lakh crore) continues to be the top fund house in terms of AUM
• SEBI dedicated fiscal year 2009-10 for investors bringing in many regulatory changes which changed the mutual fund industry trends
• Equity funds saw major outflows after the ban of entry loads
• Liquid Funds/Income Funds/Ultra Debt Short Term (erstwhile called as Liquid Plus Funds) will continue to see the inflows given the uneven interest rate scenario in near future

The fiscal year 2009-10 ended into a happy note with Mutual Fund Industry assets growing 51.6 per cent year-on-year. The industry added a total of Rs. 2.54 lakh crore to its kitty with total Average Assets under Management (AAUM) of Rs. 7.47 lakh crore. The year also saw Mutual Fund AUM’s historical peak of Rs. 8.07 lakh crore as on Nov 2009. However, it lagged the bellwether indices Sensex and Nifty 50 which clocked 80.54 per cent and 73.76 per cent returns respectively for the fiscal year 2009-10. On monthly basis, the Mutual Fund Industry Assets slipped to Rs. 7.47 lakh crore or a loss of 4.6 per cent over its Feb end of Rs. 7.82 lakh crore. The Feb month saw a hike of 2.64 per cent on monthly basis.
Reliance Mutual Fund continues to top the chart with AAUM of Rs. 1.10 lakh crore with a hefty gain of 36.4 per cent. The other leading fund houses in terms of AAUM are HDFC Mutual Fund (Rs. 88,780 crore), ICICI Prudential Mutual Fund (80,989 crore) and UTI Mutual Fund (Rs. 80,218 crore). On absolute basis, the fund houses which saw windfall gains are UTI Mutual Fund (Rs. 31,463.6 crore), HDFC Mutual Fund (Rs. 30,823.4 crore), ICICI Prudential Mutual Fund (29,556.3 crore) and Reliance Mutual Fund (Rs. 29,450 crore). The massive increase in AUM was mainly due to inflows in Debt/Income/Liquid/Liquid Plus categories. However, equity had a net outflow after SEBI banned entry loads post Aug 2009.
The fund houses which saw maximum decline on month-on-month basis are JP Morgan Mutual Fund (-31 per cent), AIG Global Investment Group Mutual Fund (-24.9 per cent), Deutsche Mutual Fund (-19.5 per cent) among others. The prominent gainers in double digits were Peerless Mutual Fund (60 per cent) and Edelweiss Mutual Fund (23.3 per cent).

Too many players, too many regulations…

India remained coupled with the ongoing global financial crisis albeit the extent of losses was small as compared to other nations where a lot of financial institutions collapsed. India, the favorite destination for foreign money witnessed an unusual concept ‘flight to safety’ which resulted in sharp depreciation of mutual funds’ assets under managements (AUMs). Some mutual funds defaulted in payments too but the timely action by SEBI along with RBI helped Indian mutual fund industry in achieving new heights in terms of AUM. Currently, the whole industry AUM stands at Rs 7.63 lakh crore with 38 pillars supporting the base. Many players entered the bandwagon witnessing the high growth rate year after year. SEBI announced a series of regulations in 2009 to protect the interests of investors and improve the liquidity conditions. SEBI started the year prohibiting the declaration of indicative portfolios and indicative yields in Fixed Maturity Plans (FMPs) by mutual fund and its distributors. It also directed liquid fund schemes to purchase debt and money market securities with maturity of up to 91 days only effective from May 01, 2009. It also directed all mutual fund players to discontinue the nomenclature of ‘liquid plus schemes’ as it gives a wrong impression of added liquidity. The above regulations were directed by SEBI witnessing the serious liquid crisis in Oct 2008. Investment in Liquid Fund schemes with papers with maturity up to 91 days only has drastically reduced the returns from 7-8 per cent to 2.5-3 per cent compounded annually. This has resulted in mass redemption from liquid fund schemes.
In India, mutual fund investment is a push-strategy rather than a pull strategy as mutual fund distributors sell the products in lieu of high upfront commissions paid from investors’ investments. The SEBI announced the most awaited decision of the Indian mutual fund history where it directed the mutual fund houses to scrap all entry loads effective from Aug 01, 2009 and empowered the distributors and independent financial advisors (IFAs) to negotiate the commission for the services rendered. The retail investors welcomed the ruling while the distributors and IFAs opposed the decision as their earnings were at stake. Indian investors are not comfortable in writing another cheque for distributors. The above ruling created a stir in mutual fund inflows in equity category and the investment dropped drastically month after month. Some large mutual fund houses dig their profits to incentivize the distributors and IFAs while it became a question of survival for small mutual fund players. Fund houses reacted by increasing the exit loads which were also later regulated by SEBI putting a cap up to 1 per cent for all redemptions within one year and no exit loads beyond 1 year. To some extent, fund houses started pushing Portfolio Management Services (PMS) where it earns a fixed return in lieu of services rendered.
The cautious approach by SEBI in regulating Indian mutual fund industry and empowering the investors with improved investment conditions resulted in an increase in total assets under Indian Mutual Fund houses. However, the equity schemes continued to witness the lackluster in terms of investments.
Come to Nov 30, 2009. The retail investors have found another opportunity in terms of investments. Mutual funds units are now allowed to trade through registered brokers of recognized stock exchanges and NSE has already provided an online trading platform to all brokers. Thus, the need for enhancing the reach of mutual fund schemes to more towns and cities will be addressed through this channel. The existing secondary market set up in 1500 towns and cities will provide another opportunity to retail investors to invest in mutual funds. To some extent, the issue of holding multiple statements of accounts would be taken care and all the mutual fund units would be in dematerialized form.
But the question remains - are we ready to swallow too many regulations in such a short span of time? May be or may not be. SEBI could have been slow in introducing the exemption of entry loads in a phased manner so that it could give some time to IFAs to settle with their new business environments. As per ICRA Online report, the average maturity period for equity stands at 2-3 years much lower than its fundamental rule of 5-10 years. Equity has always been termed as a long term investment product but the recent ruling of allowing mutual fund units may result in increased churning of mutual fund investments. Moreover, the transaction charges as levied by brokers stands at 0.3-0.5 per cent for retail investors on either side trading, thus, making it 0.6-1 per cent on both side transactions. Apart from this, the brokers may charge an additional fee for recommending mutual fund scheme to investors. Thus, the whole concept of zero entry-load vanishes and moreover, the churning will also increase putting an extra onus in terms of increased fund management charges as portfolio turnover ratio will increase. Mutual fund houses will also benefit in terms of frequent exit loads being charged from investors.
No doubt, SEBI rulings will help retail investors with improved investment environment but it should also monitor the other anomalies as mentioned above. Investors must have some reasons to smile and become an informed and disciplined player.