FY09 shocker: Equity funds book Rs 21,100 cr loss in H2

Equity fund managers of 29 mutual fund houses, which have declared their annual results so far, booked losses worth Rs 21,100 crore in the second half of 2008-09 on falling sales and redemptions of investments in equity-oriented schemes.

The fund managers of the 29 asset management companies (AMCs) decided to book loss and sold part of their equity portfolio in the second half of the fiscal fearing further correction in stock prices. The market had witnessed a 30 per cent decline in stock prices in October 2008 alone. It is not that only the domestic stock market suffered a steep fall in October, markets the world over saw massive corrections, especially in financial sector stocks, in that month.
 

GLOOM ALL AROUND
Rs crore Fund House	Loss on investments 2008-09

Reserves & Surplus

Mar 31, ‘08Mar 31, ‘09 ICICI Prudential-2,971.616,193.06182.14 Sundaram BNP-2,899.971,317.99-1,386.40 DSP BlackRock-2,333.904,809.411,545.34 Franklin Templeton-1,871.176,728.531,896.24 Birla Sun Life-1,749.583,225.04573.43 Kotak Mahindra-1,739.701,061.45-242.13 JM Financial-1,713.31511.92-1,994.64 HDFC-1,592.7310,605.694,946.91 Tata-1,210.832,586.22774.38 HSBC-1,182.541,465.01162.23 Data compiled by BS Research Bureau

The fund houses booked losses worth Rs 3,900 crore in the first half as during that period the stock market remained steady after a sharp decline from its January 8, 2008 peak.

For the entire year, 10 out of the 29 fund houses booked losses totaling Rs 19,265 crore, while the others shared the remaining loss of Rs 5,735 crore.

ICICI Prudential Mutual Fund topped the list of loss-makers by booking a loss of Rs 2,972 crore, followed by Sundaram Mutual Fund (Rs 2,900 crore), DSP BlackRock Mutual Fund (Rs 2,334 crore), Franklin Templeton Mutual Fund (Rs 1,871 crore), Birla Sun Life Mutual Fund (Rs 1,750 crore), Kotak Mahindra Mutual Fund (Rs 1,740 crore), JM Financial Mutual Fund (Rs 1,713 crore), HDFC Mutual Fund (Rs 1,593 crore), Tata Mutual Fund (Rs 1,211 crore) and HSBC Mutual Fund (Rs 1,183 crore).

The loss is mainly attributed to the sharp fall in stock prices through the financial year, which hardly provided any selling opportunity to fund houses. Though mutual fund investors stayed invested in the first half 2008-09, they redeemed their holdings in the second half.

The data on net inflows into equity schemes provided by the Association of Mutual Funds in India (Amfi) showed that equity funds, both growth and balanced, had a net outflow of Rs 9,338 crore in the second half.

The fear of loss of capital in equity also prevented fresh inflows as investment in equity-oriented schemes rose marginally by Rs 4,084 crore in 2008-09. While the first half witnessed inflows of Rs 11,560 crore, the second half saw an outflow of Rs 7,470 crore. In 2007-08, these 29 fund houses had received Rs 52,701 crore from investors for investment in equity-oriented schemes.

As the stock market continued to make losses, reserves and surplus accounts of these 29 fund houses showed massive value erosion. Cash reserves of these AMCs declined by 83 per cent, or Rs 62,000 crore, from Rs 74,850 crore in March 2008 to only Rs 13,070 crore at the end of March 2009. In fact, reserves and surplus accounts of 15 mutual funds went into the red in the financial year under review.