The Indian mutual fund industry’s assets under management (AUM) rose 3.26%, or by Rs. 317.37bn, to Rs 10.06 trillion in July 2014 from Rs. 9.75 trillion in June and slightly short of the record Rs 10.11 trillion in May, according to the monthly numbers released by the Association of Mutual Funds in India (AMFI). The rise in AUM was primarily due to inflows in equity and liquid funds.
Equity funds revived with highest inflows since January 2008
Back in favour, equity mutual funds’ AUM rose to its record high to Rs 2.52 trillion – up by 4.40% or Rs 106.06 bn -- in the month boosted by highest inflows since January 2008 of Rs 108.45 bn. Total inflows since the start of 2014 amount to Rs 189.34 bn compared with net outflows of Rs 104.26 bn and Rs 156.20 bn in the preceding two calendar years respectively. The underlying equity asset class represented by CNX Nifty Index gained 1.44% in July and 22.48% since the start of 2014 buoyed by hopes of economic reforms by the new government.
Liquid funds’ AUM rose on cyclical inflows
Liquid funds’ AUM rose 13.07%, or by Rs 282.25 bn, to Rs 2.44 trillion led by inflows of Rs 255.89 bn plus mark to market (MTM) gains. Inflows in the category were basically cyclical in nature as corporates and banks / financial institutions ploughed the surplus money back into the funds that was withdrawn in June (due to payment towards advance tax).
Income funds register highest outflows since December 2012
Income funds logged outflows of Rs 100.80 bn, the highest in the last 19 months, resulting in a monthly fall of 1.53%, or by Rs 73.31 bn, in AUM (Rs 4.72 trillion). The closed ended income funds (mostly fixed maturity plans) posted outflows of Rs 49.26 bn, the open ended income funds saw outflows of Rs 42.30 bn and the interval funds registered outflows of Rs 9.24 bn in July. However, fall in the category’s asset was capped by MTM gains in the underlying assets. Outflows from the category could be an outcome of the change in taxation announced by the new government in the Union Budget. The government increased the long-term capital gains tax on debt-oriented mutual funds from 10% to 20% and changed the definition of 'long term' for debt mutual funds to 36 months from 12 months effective from the date of the presentation of the budget (July 10, 2014).
Gilt funds post inflows for the first time in eight months
Gilt funds bucked the seven-month outflow trend by registering inflows of Rs 1.10 bn. The category’s assets rose 2.79%, or by Rs 1.53 bn, to Rs 56.45 bn led by inflows and MTM gains.
Gold ETFs continue to lose sheen
The outflow trend continued to weigh on gold ETFs. July witnessed outflows of Rs 1.05 bn (although lowest outflows in the past 14 months) and a decline of 2.14%, or by Rs 1.70 bn, in assets. MTM losses also added to the fall in the category’s AUM as the underlying asset prices (represented by CRISIL Gold Index) fell 0.75% during the month.
Assets of other ETFs rose to record high
Assets under other ETFs rose to a record high of Rs 50.83 bn, up 0.69%. The recent rise in the equity market has been attracting inflows in this section of equity-oriented funds; the latest month posted inflows of Rs 2.11 bn and consolidated inflows of Rs 24.29 bn since the start of 2014.