MF AUM below Rs 8 trn on outflows from liquid funds: CRISIL

India Infoline News Service | Mumbai |

The mutual fund industry witnessed outflows of Rs 501 bn in July (mainly from liquid funds) as against Rs 484 bn in the previous month

The Indian mutual fund industry’s month-end assets under management (AUM) fell by over 6% month on month or Rs 506 bn to end below the Rs 8 trillion mark (first time since March 2013) at Rs 7.61 trillion in July as per the monthly numbers released by the Association of Mutual Funds in India (AMFI).

Most of the outflows were from liquid funds which witnessed volatility in performance following the Reserve Bank of India’s (RBI’s) liquidity-curbing measures to strengthen the rupee.
 
Rare outflows seen in the first month of the quarter, last such occurrence seen in October 2010
 
The mutual fund industry witnessed outflows of Rs 501 bn in July (mainly from liquid funds) as against Rs 484 bn in the previous month. An outflow in the first month of the quarter is rare and was last seen in October 2010 (though much smaller at Rs 57 bn). Normally, the industry sees outflows towards the end of the quarter from corporates and banks in short maturity fixed income categories. Corporates withdraw to meet their advance tax requirements while banks withdraw to meet their quarter-end capital adequacy requirements. However, these outflows usually see a reversal over the subsequent two months.
 
Liquid funds faced heavy redemption pressure

 
Liquid funds’ AUM fell by 21% to Rs 1.29 trillion primarily due to outflows of Rs 453 bn. The category witnessed large-scale redemption following the recent liquidity-tightening measures by the RBI to strengthen the rupee. The category (represented by CRISIL – AMFI Liquid Fund Performance Index), gave 0.37% returns in the month.
 
Both equity and debt oriented funds reported a fall in AUM
 
AUM of equity as well as debt oriented funds fell in the month due to outflows from the respective categories amid weakness in the underlying markets due to the central bank’s recent measures. Equity funds’ AUM fell by 4.4% or Rs 75 bn to Rs 1.63 trillion in July led by outflows (of Rs 18 bn as against inflows of Rs 9 bn in the previous month) as well as MTM losses. The underlying equity market (CNX Nifty) fell by 1.7% in the month.
 
Within the debt category, income funds’ assets fell by over 2% to Rs 4.32 trillion while gilt funds’ AUM posted a fall of over 3% to Rs 82 bn due to a recent rise in bond yields (yields and bond prices/ NAVs move in opposite directions). However, the gilt funds category was a rare gainer in terms of inflows of nearly Rs 1 bn in July as against outflows of Rs 3 bn in the previous month.
 
Renewed interest in FMPs
 
The month also recorded renewed interest in fixed maturity plans (FMPs); there were as many as 37 new launches out of the total 40 new fund offers (NFOs) launched. In June, only 15 FMPs were launched out of the total 19 NFOs launched during the month. Rise in FMP launches was an outcome of the recent rise in bond yields. FMPs are closed ended funds which lock-in the high yields over the time period of the scheme.
 
Gold ETFs reported highest rise in AUM since October 2011
 

Gold ETFs’ AUM increased 11% to Rs 107 bn, the highest growth since October 2011, despite outflows of Rs 1 bn in July. The rise in AUM was due to MTM gain as the underlying asset prices, represented by CRISIL Gold Index, rose 12% in the month tracking positive global trend.
 
Fund of funds investing overseas attract inflows
 
Fund of funds investing overseas saw marginal inflows of Rs 0.29 bn in the month, the second month of inflows prior to which the category saw outflows for 12 consecutive months. The category also witnessed MTM gains due to a sharp depreciation of the Indian rupee in recent months. The category AUM rose by 9% to Rs 21 bn in the month.
 

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