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.

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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

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Liquid, income and equity led to total outflows of Rs. 71,838 crore

Sensex at its 33-month peak; a cycle from 20,000 to 20,000. Investors are anxious, markets are overheated. Mutual fund industry has been bleeding and it remains continuous, in fact certain. Equity funds have been witnessing redemptions; in Sept 2010, equity funds saw its maximum ever redemption amount of Rs. 7,011 crore. In the last 14 months, since the ban of entry load on mutual funds, the outflows have been for 11 times while inflows have been for 3 times. In totality, the redemptions till date since Aug 2009 are Rs. 21,461 crore. Not only equity funds, Balanced Funds too witnessed an outflow of Rs. 414 crore. It is the maximum outflow in Balanced Category in recent years.

Earlier, the fund houses were complaining of low incentives to boost distributors to sell products; now the investors have been redeeming the funds as many fear that there could be a correction in Equity Markets. With many funds reaching new NAV highs, investors preferred trimming their holdings. However, the gross inflows in Equity Funds during the month were the highest since April this year. It was Rs. 5,793 crore in Sept 2010 compared with Rs. 4,928 crore in Aug 2010. Also, the total assets as in Sept 2010 in Equity Category grew to Rs. 1,85,484 crore from Rs. 1,79,200 crore in Aug 2010 mainly on account of rising of equity.

Except Gilt Funds and ETFs, all other categories witnessed net outflows triggering systematic outflows. Liquid/Money Market Funds witnessed the maximum outflow to the tune of (-) Rs. 36,108 crore. Similarly, Income Funds witnessed outflow by Rs. 28,637 crore. Both categories which cater mainly to institutional investors witnessed heavy redemptions due to liquidity deficit in the financial system. Banks, major investors in these funds have also redeemed their investments in Sept 2010. In totality, the total exposure of banks to Mutual Funds as per the RBI estimates have declined from Rs. 59,984 crore as on Aug 27, 2010 to Rs. 33,534 crore as on Sept 24, 2010.
Overall the industry witnessed net outflows of Rs. 71,838 crore due to large redemptions in debt funds.
ELSS, Equity Linked Saving Schemes where investors get benefits for investments up to Rs. 1 lakh under Sec 80C also saw redemptions to the tune of Rs. 270 crore for the sixth consecutive times since April 2010.

On a positive note, Gilt Funds witnessed a net inflow to its kitty. It witnessed a net inflow of Rs. 521 crore. The G-Sec yields have been trading at their high levels mainly on account of RBI’s aggressive monetary policies and high inflationary pressures. Headline Inflation as measured by WPI is set to moderate by the end of this fiscal year. Moreover, liquidity may also improve by Jan-Feb next year. All these factors may bring down G-Sec yields which will benefit these Gilt Funds to the maximum.

In Equity Category, there were 3 NFOs – IDBI Nifty Junior Index Fund; Reliance Small Cap Fund, Reliance Index Fund – Nifty Plan and Sensex Plan which collected a total amount of Rs. 677 crore. Two Ultra Short Term Funds – IDBI Ultra Short Term Fund and Pramerica Ultra Short Term Bond Fund were launched which collected Rs. 597 crore in combine. FMPs continue to rule the industry with a total of 37 new NFOs which collected a total amount of Rs. 7,454 crore. The high short term yields can be attributed to these launches which have caught the attraction of investors.