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Mutual funds' asset base falls 1.5% in June

Last Updated: Tuesday, July 10, 2012 - 14:23

Rohit Joshi and Siddharth Tak/Zee Research Group

New Delhi: Huge outflows worth over 25,000 crore from the liquid funds led the Indian mutual funds to log a near 1.5 percent decline in their asset base in June on a month-on-month basis. However, there is nothing unusual about it as quarter-end outflows from liquid funds are a regular feature in the industry. Liquid fund, which receive investments from corporates, withdraw their short term investments to meet the payment of advance tax and dividends.

According to data released by the Association of Mutual Funds in India (AMFI), the fund industry shedded around 24,000 crore during the month of June, which led to decline in the overall asset base to 6,88,825 crore.Most fund categories witnessed outflows during the month. Liquid funds saw a maximum outflow worth over 25,000 crore, followed by Gold ETFs (227 crore), Equity (186 crore), ELSS (100 crore), and Fund of Funds (44 crore).

Explaining the reason behind the maximum outflows seen in Liquid funds, Mahendra Jajoo, ED & CIO Fixed Income, Pramerica Mutual Fund, opined, “Majorly Corporates and banks withdraw their short-term investments to meet their advance tax and capital adequacy requirements respectively. There is nothing to worry as it’s a typical quarter end outflows. Hence, this outflow is in line with expectations.”

“This quarter (April – June) AUM has shown a positive growth in comparison to the preceding quarter,” he added.

The equity market represented by the benchmark S&P CNX Nifty has increased by over 7 percent in the month of June. With Prime Minister Manmohan Singh once again heading the finance ministy, equity market is expecting that fresh economic reforms would be propelled from his side. However, equity and ELSS schemes has witnessed redemption pressure in the month of June.Capturing the paradox of equity markets, Nelson D’souza,General Manager,,said,“Lack of confidence is witnessed amongst the investors regarding equity funds, therefore ,while the market was on uptrend, people have redeemed in order to book profit or to cut down their losses.”

Talking about the redemption seen in Gold ETFs, D’souza, said, “Globally gold prices are on downtrend which is urging investors to look for another safe heaven.”

Focusing on the categories where fund inflows have been seen, it’s the Income fund which leads the category. Income fund posted inflows worth 1,567 crore, followed by gilt funds (115 crore), balanced funds (19 crore).

It’s the third month in a row where Income funds saw inflows. Endorsing this fact D’souza of, averred, “Lot of HNIs and retail investors are opting this fund due to higher yields.”

Exhibit: Net Investments in Mutual Funds

Inflows (Rs. in Crore)
Category April May June
Income 17,874 1580 1567
Equity -455 506 -186
Balanced 23 61 19
Liquid 75,752 25,052 -25,128
Gilt -230 -371 115
ELSS -160 -86 -100
Gold ETFs 50 -41 -227
Other ETFs -51 32 15
Fund of Funds -11 9 -44
Net Flow 92,746 26,742 -23,969
AUM 6,80,154 6,99,284 6,88,825
Growth in AUM (in per cent) 2.8% -1.5%
Source :AMFI
First Published: Tuesday, July 10, 2012 - 14:23

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