The monthly release by the Association of Mutual Funds in India (AMFI) reflects the New Year began on an optimistic note for the Indian mutual fund industry. Month-end assets under management (AUM) increased to an all-time high of Rs. 8.26 trillion in January 2013. Led by inflows into money market and income funds, AUM rose 8.7% (Rs. 662bn) to record the highest percentage rise in the past nine months. Inflows of Rs. 607bn in the month were the highest since April 2012 compared with outflows of Rs. 409bn in the previous month.
Income funds assets highest in 32 months, gilt funds AUM at record high
Income funds saw inflows of Rs. 173bn that took their AUM to almost Rs. 4 trillion, the highest month-end assets for the category in the past 32 months. Inflows were mainly in ultra-short term debt funds, long term debt funds and dynamic bond funds. Gilt fund assets also rose by 19% to stand at a record high of Rs. 77bn in the month led by inflows of Rs. 11.5bn—the highest in more than four years. Long term bond funds and gilt funds attracted inflows on expectations of lower interest rates. On January 29, 2013, the Reserve Bank of India (RBI) reduced key interest rates (repo rates) by 25 basis points (0.25%) to 7.75%. Bond prices (net asset values) and interest rates (yields) move in opposite directions owing to which these funds benefit from a fall in interest rates. Also, longer tenure funds benefit more than shorter tenure funds.
Equity funds continue to log outflows for the eighth month in a row
Equity funds continued to see outflows (Rs. 27bn) for the eight consecutive month in January. The category assets fell by 0.9% to Rs. 1.90 trillion led by outflows although the underlying market (represented by S&P CNX Nifty) was up 2.2% for the month. Investors continued to book profits on every rise in the market.
Inflows in liquid funds highest since April 2012
Money market / liquid funds saw net inflows of Rs. 449bn, the highest since April 2012. Liquid funds garnered over 74% of the total inflows (of Rs. 607bn) for the month. Inflows are part of the category’s cyclical money flows. Historical trends show that quarter-end outflows in the category are reversed in the subsequent month (outflows in December followed by inflows in January). Corporates, the major investors in this category, usually withdraw money to meet quarter-end advance tax requirements and re-invest the same in the subsequent month. Assets of liquid funds rose to its highest level since April 2011 at Rs. 1.96 trillion.
Gold ETF assets crosses Rs. 120bn mark
The month-end assets of gold ETFs crossed the Rs. 120bn mark for the first time. The category assets rose 0.5% to Rs. 120.6bn at the end of January 2013 due to inflows of Rs. 0.8bn. The category inflows were the lowest since June 2012. Gold prices (represented by the CRISIL Gold Index) ended flat for the month.
Month-on-month mutual fund flows and AUM distribution