Market toll: MF assets see largest decline since December 2010

Indian mutual funds’ average assets under management (AUM) fell by 4.5% or Rs 38400 crore, to Rs 8.08 lakh crore during the quarter ended September 2013.

This is against Rs 8.47 lakh crore in the previous quarter (excluding fund of funds), as per the latest numbers released by the Association of Mutual Funds in India (AMFI).

A CRISIL study shows the quarter marked the sharpest fall in mutual fund assets since December 2010 as investor sentiments were hurt due to volatility in equity and debt markets following the weak Indian currency.

Money market and ultra short term debt funds’ AUM declined by Rs 23,100 crore and Rs 18,300 crore, respectively, while equity funds lost Rs 12,700 crore.

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[caption id=“attachment_1157625” align=“alignleft” width=“380”]  Money market and ultra short term debt funds’ AUM declined by Rs 23,100 crore and Rs 18,300 crore, respectively, while equity funds lost Rs 12,700 crore.[/caption]

But amidst the gloom and doom, however, fixed maturity plans (FMPs) saw inflows of Rs 14,200 crore in the quarter thanks to rising yields. CRISIL said most mutual fund houses (34 out of 44) recorded a fall in their assets during the quarter. The share of direct plans increased marginally over the quarter to 26 percent of the industry’s AUM vis–vis 25 percent in the previous quarter.

Bad times for ultra short term, money market funds

Consolidated assets of money market and ultra short term funds saw a fall of Rs 41,400 crore in the latest quarter, the biggest loss for the combined categories since the AMFI started declaring average AUM numbers in September 2010.

CRISIL said the fall in assets was due to heightened volatility in the categories post the liquidity tightening measures announced by the Reserve Bank of India (RBI) since mid-July 2013 to curb the fall in the Indian rupee. AUM of liquid/ money market funds fell by 12 percent or Rs 23,100 crore to Rs 1.71 lakh crore while AUM of ultra short term debt funds fell by 17 percent or Rs 18,300 crore to Rs 86,900 crore during the quarter.

FMPs witness sharp rise in assets, equity funds slump

Assets of FMPs rose by Rs 14,200 crore in the latest quarter, the highest gain recorded by the category since January-March 2011, as investors chose the category to benefit from the rise in yields (an outcome of the liquidity tightening measures by the RBI).

CRISIL points out that as many as 159 of the 167 new fund offers (NFOs) launched during this period were FMPs compared to 54 FMPs launched in the previous quarter. FMPs are closed-ended debt oriented mutual funds which lock in the high yields over the period of the scheme. They also provide tax benefits in terms of indexation (where returns are adjusted for inflation) if held for more than one year.

Equity mutual funds’ average AUM fell by 6 percent or Rs 12,700 crore, the highest fall in the last seven quarters. The AUM slipped to Rs 1.86 lakh crore in the September quarter led by outflows and mark to market (MTM) fall. The underlying market, represented by the CNX Nifty, fell by 2 percent during the quarter due to adverse global and domestic economic cues, the analysis said.