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

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.

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!