MFs scale 13-quarter peak with 8.4% gain in average assets

India Infoline News Service | Mumbai |

For the whole of 2013, the industry’s assets increased 11%, or Rs 900 bn, vis-à-vis a 15% growth seen in 2012

Average assets under management (AUMs) of Indian mutual funds (excluding fund of funds) rose 8.4%, or by Rs 682 bn, to Rs 8.77 trillion in the quarter ended December 2013, data released by the Association of Mutual Funds in India (AMFI) show. This is the highest AUM for the industry since September 2010 -- when AMFI started declaring quarterly average numbers -- and the largest quarterly gain in mutual funds’ assets. For the whole of 2013, the industry’s assets increased 11%, or Rs 900 bn, vis-à-vis a 15% growth seen in 2012. The growth in the latest quarter was driven by inflows into liquid funds and fixed maturity plans (FMPs), besides equity funds.
 
Equity fund assets rise 
Equity mutual funds’ average AUM rose 5%, or Rs 96 bn, during the quarter – the highest quarterly increase for the category since September 2010 – to Rs 1.96 trillion, primarily due to mark to market (MTM) gains. The underlying market, represented by the CNX Nifty, gained 10% during the quarter, led by positive global sentiment, strong foreign institutional investor (FII) buying and pullback of liquidity tightening measures by the Reserve Bank of India (RBI). The rise in assets was despite net outflows in the category due to profit booking and volatility in the underlying market.
 
Money market funds gain the most in 11 quarters
Assets of money market funds grew a whopping 35%, or Rs 602 bn -- marking the highest rise since the March 2011 quarter – to Rs 2.31 trillion, on heavy inflows following a reversal of liquidity tightening measures by the RBI once the exchange rate volatility eased. The central bank had tightened liquidity in the banking system in July-August to curb the sharp depreciation of the rupee against the dollar. Liquidity in the banking system also improved due to gilt purchases via open market operations (OMOs) and additional repo auction facility extended by the RBI.
 
Assets under FMPs hit a new high
Assets of FMPs increased sharply over the quarter to close at a new high as investors lapped up these closed ended debt focussed funds to benefit from the rise in yields across debt securities. The category saw a rise of Rs 231 bn or 21%, which is the largest gain since March 2011, to close at a record high average AUM of Rs 1.32 trillion in the latest quarter. FMPs are closed ended funds which lock in the yields (currently high) over the time period of the scheme. Yields on the one-year commercial paper (CP) and certificate of deposit (CD) traded at 9.92% and 9.28%, respectively on December 31, 2013, up significantly from 8.76% and 8.15% at the end of June 2013 (before the RBI’s measures).
 
Debt and gilt funds the worst performers
For debt (long and short-term) and gilt funds, it was the worst quarter since March 2011, mainly due to the interest rate volatility in the domestic market, caused by resurgent inflationary pressures and the recent fall in the rupee. To arrest the rising inflation, the RBI hiked its key interest rate -- the repo rate -- to 7.75% by the year-end, after having cut it to 7.25% earlier in the year to promote growth. Debt (long and short term) funds’ AUM fell by Rs 179 bn to Rs 1.81 trillion, while gilt funds saw an erosion of Rs 7 bn in their AUM, currently at Rs 77 bn. Bond prices and yields move in opposite directions. When interest rates rise, as seen recently, yields run up but bond prices decline, negatively impacting gilt and long-term debt fund NAVs (returns). 
 
Gold ETFs’ corpus shrinks 11%
Average AUM of gold exchange traded funds (ETFs) witnessed a fall (down Rs 11 bn, or 11%) at Rs 95 bn in the December quarter due to outflows as well as MTM losses. Investors have pulled out money from the category in recent months amid a weak trend in underlying asset prices.
 
Share of direct plans rises to 30%
The share of direct plans increased moderately over the quarter to 30% of the industry’s AUM vis-à-vis 26% in the previous quarter. In terms of absolute assets, the average AUM of direct plans offered by mutual funds rose 25% (Rs 520 bn) to Rs 2.63 trillion during the December quarter from Rs 2.11 trillion in the September quarter. Direct plans came into existence on January 1, 2013 after the Securities and Exchange Board of India (SEBI) asked fund houses to provide informed investors direct access to mutual fund schemes sans any distributor cost.
 
Most fund houses post a rise in average AUM
Of the 44 fund houses, 32 posted a rise in AUM in the quarter. Shriram Mutual Fund was a new entrant with AUM of Rs 237 mn. ICICI Prudential Mutual Fund registered the highest growth in assets in absolute terms, up by Rs 120 bn at Rs 972 bn, followed by Reliance Mutual Fund, whose assets rose by Rs 92 bn to cross the Rs 1 trillion mark (Rs 1.03 trillion). In percentage terms, BOI AXA Mutual Fund saw the highest rise of 63% in assets at Rs 18 bn.
 
HDFC Mutual Fund’s AUM retains top position
HDFC Mutual Fund’s average AUM retained its top position across fund houses in the December quarter with respect to total assets managed. The fund’s average AUM was up by Rs 59 bn, or 5.8%, to Rs 1.09 trillion. Reliance Mutual Fund maintained the second position at Rs 1.03 trillion, up 9.9%, or Rs 92 bn. ICICI Prudential Mutual Fund was ranked third in the asset tally at Rs 972 bn; its average assets were up Rs 120 bn, or 14.1%. The share of the top five mutual funds’ assets was 53% in the December quarter (same as previous quarter) while the share of top 10 funds’ assets was 78% (same as the previous quarter). The bottom 10 fund houses continued to occupy less than 1% of the average AUM.
Table 1 – Category-wise average AUM (Rs bn)
Mutual fund category Oct-Dec 2013 Jul-Sep 2013 Absolute Change (bn) % Change
Equity 1955.28 1859.27 96.01 5.16
Liquid/money market 2313.06 1711.19 601.87 35.17
Ultra short term 804.26 869.48 -65.22 -7.50
Short term debt 728.26 770.83 -42.57 -5.52
Long term debt 1082.12 1218.93 -136.81 -11.22
Gilt 76.76 83.53 -6.77 -8.11
Fixed maturity plans (FMPs) 1316.62 1086.08 230.54 21.23
Other debt-oriented funds 359.37 345.58 13.79 3.99
Gold ETFs 95.34 106.67 -11.33 -10.62
Others 26.25 31.67 -5.41 -17.09
Total 8765.46 8083.00 682.46 8.44
Source - CRISIL Mutual Fund Database
 
Table 2 – Category-wise average AUM of direct plans (Rs bn)
Mutual fund category Oct-Dec 2013 Jul-Sep 2013 Absolute Change (bn) % Change
Equity 65.36 55.65 9.71 17.44
Liquid/money market 1282.93 917.29 365.64 39.86
Ultra short term 290.57 273.62 16.94 6.19
Short term debt 163.13 173.92 -10.79 -6.20
Long term debt 162.46 172.61 -10.15 -5.88
Gilt 20.10 21.41 -1.32 -6.15
Fixed maturity plans (FMPs) 595.25 452.43 142.82 31.57
Other debt-oriented funds 47.53 40.66 6.87 16.89
Gold ETFs NA NA NA NA
Total 2627.31 2107.59 519.72 24.66
 
Table 3 – Top 10 AMCs by average AUM (Rs bn)
Mutual fund category Oct-Dec 2013 Jul-Sep 2013 Absolute Change (bn) % Change
HDFC Mutual Fund 1089.90 1030.46 59.44 5.77
Reliance Mutual Fund 1024.87 932.49 92.38 9.91
ICICI Prudential Mutual Fund 971.91 851.74

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