Mutual fund industry assets at all-time high

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India’s mutual fund industry hit record assets under management (AUM) of Rs 9.03 lakh crore at the end of January, raising the total corpus by 9.4 per cent, or Rs 77,400 crore in the first month of the New Year.

Data released by the Association of Mutual Funds in India (Amfi) showed Rs 83,500 crore fresh inflow, which was the highest since April 2013.

According to an analysis by Crisil Research, bulk of this investment came into money market schemes and liquid funds.

These debt funds mopped up Rs 77,500 billion fresh investments, which was the highest in nine months. This marked a 43 per cent growth, chiefly due to periodical inflows in the banking system. In this category, quarter-end outflows in December are typically reversed in the very next month (January), as banks and companies reinvest surplus funds that they withdraw to pay advance tax.

Some improvement in liquidity due to lending by the Reserve Bank of India (RBI) through its term repo window, gilt purchases via open market operations and government capital infusion into state-owned banks contributed to this inflow.

Income funds — which include long-term, short-term and ultra short-term debt funds and fixed maturity plans, or FMPs — saw Rs 5,900 crore net inflows after outflows totaling Rs 12,300 crore for two consecutive months in November and December.

The inflows were primarily into short-term debt funds and FMPs due to the attractive short-term rates caused by RBI’s monetary tightening measures. The central bank hiked its key interest rate – the repo rate – by 25 bps to 8 per cent in January. This was the third hike by RBI – a total hike of 75 bps since September 2013 – in keeping with its objective to curb surging inflation.

Equity funds, including the equity-linked savings schemes, recorded inflows for the third consecutive month, mopping up Rs 427 crore in January, which was less than Rs 699 crore and Rs 857 crore that in November and December, respectively. Assets of this category of funds, however, declined by 4 per cent, or Rs 7,200 crore, to Rs 1.75 lakh crore, thanks to weakness in the underlying market.

Domestic equities represented by the benchmark CNX Nifty index declined 3.40 per cent during the month on weak domestic and global cues.

Investors continued to exit gold exchange-traded funds (ETFs) for the eighth consecutive month in January. There was net outflow of Rs 165 crore in January compared with Rs 157 crore in the previous month.

Gilt funds saw outflows for the second consecutive month amid weak sentiment for gilts due to persistent worries over monetary tightening by RBI. The latest month saw outflows of Rs 135 crore vs outflows of Rs 519 crore in December.

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