MF AUM rises for 5th consecutive quarter

India Infoline News Service | Mumbai |

Long term debt funds AUM cross the Rs 1 trillion mark for the first time

Indian mutual funds’ average assets under management (AUM) rose to a new high of Rs. 8.47 trillion in the April-June 2013 quarter, up by 3.68% or Rs. 300 bn from Rs. 8.17 trillion in the previous quarter (excluding fund of funds) as per the latest numbers released by the Association of Mutual Funds in India (AMFI).

It marks the industry’s fifth successive quarterly AUM gain. The rise was led by heavy inflows into debt mutual funds on the back of interest rate cuts by the Reserve Bank of India (RBI).

AUM of long-term debt and gilt funds rise on strong inflows
Assets of long-term debt and gilt funds rose in the June quarter due to continued inflows into the category with investors expecting the interest rate scenario to ease in the coming months. AUM of long-term debt funds have now risen for the past eight consecutive quarters. The category’s average AUM rose by Rs. 265 bn (or 31%) during the quarter - the highest absolute gain for the category since AMFI started declaring average AUM data in September 2010 – to Rs 1.12 trillion; this is the first time that the category has crossed the Rs 1 trillion mark.

Gilt funds too rose for the third straight quarter with assets rising by Rs 8 bn (or 10%) to Rs 86 bn in the quarter. The RBI has cut its key interest rate (repo rate) thrice in the current calendar year (25 basis points each time) till May 2013. As bond prices and yields move in opposite directions, bond prices rise as interest rates fall and positively impact gilt and long-term debt fund NAVs (returns). The categories of long-term debt and gilt funds represented by the respective CRISIL Fund Ranked categories as of March 2013 have returned 12% and 13% respectively over the past year ended June 2013. 

Short-term debt and ultra short term debt funds too rose on inflows
Short maturity debt funds (short-term debt and ultra short term debt funds) saw a rise in their assets due to improvement in the banking system’s liquidity in the first quarter of the new fiscal. Volatility in other primary asset classes such as equity and gold also acted as a positive for inflows in to these categories. Short-term debt funds rose by Rs 115 bn (compared with Rs 22 bn rise in the previous quarter) to Rs 728 bn in the June quarter while the ultra short term category’s average AUM gained by Rs 56 bn (compared with fall of Rs 131 bn in the previous quarter) to Rs 1.05 trillion in the latest quarter.

Equity funds’ assets saw highest fall in past six quarters
Equity mutual funds’ average AUM fell for the sixth quarter in a row by around 5% or Rs 100 bn in the June quarter to Rs 1.99 trillion led by heavy outflows despite mark to market gains seen during the quarter. The underlying market, represented by the CNX Nifty, rose by 3% during the quarter on hopes of monetary easing and the subsequent repo rate cut by 25 bps in May 2013 by the RBI; internationally, positive economic cues from US also helped domestic equities.

Gold ETFs’ average AUM saw a record fall
Average AUM of gold exchange traded funds (ETFs) witnessed a record fall (down Rs 13 bn or 11%) to Rs 106 bn in the June quarter due to outflows as well as mark to market losses. Investors withdrew their investments from the category in recent months amid a weak trend in underlying asset prices. Local gold prices, represented by the CRISIL Gold Index, fell by 15% in the June quarter. Gold prices fell in the quarter on worries of supply glut, a sharp rise in the dollar internationally, and weak domestic demand. Measures by the Indian government and the RBI to reduce gold import in the country in their bid to reduce the current account deficit (CAD) also dampened sentiments for gold prices.

Most fund houses post a rise in average AUM
Out of the 44 fund houses, 24 posted a rise in AUM in the quarter. IDFC Mutual Fund registered the highest growth in assets in absolute terms, up by Rs 61 bn to Rs 389 bn, followed by UTI Mutual Fund, whose assets rose by Rs 53 bn to Rs 747 bn in the quarter. In percentage terms, L&T Mutual Fund saw the highest rise of 23% in assets to Rs 138 bn. AMCs which witnessed a fall in AUM included Canara Robeco Mutual Fund, whose average AUM fell by Rs 17 bn to Rs 72 bn, and JPMorgan Mutual Fund, whose average AUM fell by Rs 10 bn to Rs 149 bn.
 
HDFC Mutual Fund AUM retains its top position
HDFC Mutual Fund’s average AUM retained its top position across fund houses in the June quarter with respect to total assets managed. The fund’s average AUM was up by Rs 33 bn or 3.2% to Rs 1.05 trillion. Reliance Mutual Fund maintained the second position at Rs 978 bn, up by 3.4% or Rs 32 bn. ICICI Prudential Mutual Fund was ranked third in the asset tally at Rs 917 bn; its average assets were up Rs 39 bn or 4.4%. Share of the top five mutual funds’ assets was 53% in the June quarter (same as previous quarter) while the share of top 10 funds’ assets was 78% (higher than 77% in the previous quarter). The bottom 10 fund houses continued to occupy less than 1% of the average AUM.




 

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