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

Net MF outflows of Rs. 1,27,451 cr in Mar 11; Rs. 13,405 Cr outflow in Equity in FY 10-11

Despite the equity market closing in net positive in FY 2010-11, it failed to excite the Indian Mutual Fund Industry in FY 2010-11. In Jan-Mar 2011, Mutual Funds had been actively buying in Equity but it did not boost up the overall AUM in Equity. The total AUM in Equity sans ELSS, Balanced and Other ETFs in Mar 2011 stands at Rs. 1,69,754 crore compared to Rs. 1,74,054 in the same month last year. Overall, there has been a net outflow of Rs. 13,405 crore from Equity category, thus, making it as the highest absolute redemption in a particular year. Since the ban of entry loads in Mutual Funds in Aug 2009, the Mutual Fund Industry has been bleeding with constant outflows. However, it stabilized in Feb 2011 with the highest net inflow of Rs. 2,495 crore in last 20 months.

Net inflows in Mar 2011

In Mar 11, there has been a total outflow of Rs. 1,27,451 crore from Mutual Fund industry, a common phenomenon in every financial year end month. In Mar 10 and Mar 09, it witnessed a net outflow of Rs. 1,62,165 crore and Rs. 98,697 crore respectively. Generally, banks redeem their investments in March again to invest in the following month. In FY 2010-11, there has been a total outflow of Rs. 48,931 crore. Categorically, the Income and Liquid/Money Market saw an outflow of Rs. 30,612 crore and Rs. 98,255 crore respectively.

FMPs flooded in Mar 11

The liquidity deficit and the burgeoning inflation which have forced the policy makers to raise the interest rates have actively changed the dynamics of the market. The Certificate of Deposits, popularly known as CDs – a short term money market instrument used by banks to borrow from the market has been very active in Jan-Mar 2011, predominantly in Mar 2011. Banks have issued CDs even at higher rates (10 per cent plus) in order to inflate the balance sheet as the year end closes in. In Mar 11 alone, there has been a total of 132 FMPs launched garnering a total corpus of Rs. 27,912 crore. In Feb 11 and Jan 11, there have been a total of 65 FMPs and 48 FMPs collecting Rs. 17,232 crore and Rs. 12,713 crore respectively. With money market rates falling specially CDs’ rates, the FMP saga may not continue in coming months.

Other categories too saw inflows

The other equity categories such as ELSS, Balanced Funds and Other ETFs saw inflows to the tune of Rs. 576 crore, Rs. 231 crore and Rs. 107 crore respectively. March being the tax season month saw the flows in ELSS as investors invest to save taxes up to Rs. 1 lakh. The Gold ETFs continued its positive flows in last 23 months except in May 10 where it saw a marginal outflow of Rs. 6 crore. In Mar 2011 and FY 10-11, it saw an inflow of Rs. 648 crore and Rs. 2,250 crore respectively. The inflow in Mar was the highest inflow till date mainly on surge of commodities due to geo-political tensions in MENA region which made people lured towards gold.

New Funds enter into industry

In Equity category, there were two NFOs – IDFC Infra Fund and Mirae Asset India – China Consumption Fund collecting a total asset of Rs. 93 crore. In Income Fund category, there were 3 NFOs in Open-Ended category and 134 NFOs in Close-Ended Category. The month also saw two capital protection funds by Sundaram Mutual Fund and SBI Mutual Fund. In other ETF category, the in-house promoted NASDAQ-100 ETF collected Rs. 48 crore.

                                                                                                                               Soure: MOSL
Happy Investing!

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.