MF industry sees rise in asset size, but inflows drop in FY14

Tags: Mutual Funds

Equity funds bear the brunt of heightened redemption pressure

Even as the mutual fund industry cheers the record average assets size it clocked in the last quarter, the net inflows into mutual fund schemes have seen a slack in the current financial year (FY 2013-14).

In October-December 2013 quarter, the average assets under management (AAUM) touched Rs 8,76,546 crore, the highest ever since Association of Mutual Funds in India (Amfi) replaced monthly AAUM data releases with quarterly AAUM data releases from October-December 2010 onwards. It broke previous high of about Rs 8,46,677 crore touched in April-June 2013 quarter.

However, monthly net inflows data, also released by Amfi, show in FY14, from April to December, the mutual fund industry witnessed an aggregate net inflow of Rs 76,100 crore, more than one-third lower than the aggregate net inflow of Rs 1,20,300 crore witnessed in the corresponding April-December period of FY13.

Among the various mutual fund categories, equity funds have borne the brunt of heightened redemption pressure from investors. Collectively, equity schemes have seen a net outflow of Rs 6,593 crore in FY14 so far, which though is less worse than the net outflow of Rs 10,816 crore they saw collectively in the same period of FY13. The scenario worsened at the close of FY13, when for the full year, equity schemes registered a total net outflow of Rs 12,931 crore.

Investor fund flows into income funds, the crucial mutual fund category, which accounts for half of the fund industry’s size, and which had been the saving grace for the industry in FY13 when it attracted a total net inflow of Rs 82,981 crore, too have slackened in the current financial year. At the end of December, the FY14 net inflow in income schemes have been to the tune of only Rs 13,847 crore, much lower compared with the same period in FY13 when it saw net inflow of Rs 69,853 crore.

Gold exchange-traded funds have seen a collective net outflow of 1,800 crore in FY14 so far, in contrast with a net inflow of Rs 1,428 crore in the same period of FY13.

It is the liquid funds category that has helped the mutual fund industry’s assets size grow in the current year. Pre-dominantly invested in by large corporate and institutional investors, liquid and money market schemes, have seen a collective net inflow of Rs 73,588 crore in FY14 so far, higher than corresponding previous year’s net inflow of Rs 59,508 crore.

But flows into liquid funds can be highly volatile. When FY13 ended, the net inflow in liquid funds had muted to Rs 3,226 crore. Just last month there was a new outflow of Rs 66,313 crore. In the whole of calendar 2013, the highest net inflow and net outflow took place in a span of consecutive months. In March 2013, they had collectively seen a net outflow of Rs 1,09,789 crore and in the very next month they saw a net inflow of Rs 85,745 crore. Clearly, the same money from corporate and institutional investors circulates in liquid funds on a month-to-month basis.

rajeshgajra@mydigitalfc.com

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