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.
