MF assets fall 1.5% in July

Money pulled out by banks in June-end was not invested due to liquidity crunch.

Liquidity crunch continued to take a toll on the domestic fund market in July. Despite being the first month of the September quarter, the 40-player mutual fund industry could not manage inflows. Its average assets under management (AAUM) fell 1.52 per cent sequentially.

This is in contrast to the general trend that the first month of a quarter sees return of money withdrawn by banks at the end of the previous quarter.

According to latest statistics from the Association of Mutual Funds in India, total AAUM of the industry stood at Rs 6,65,567.42 crore in July as against Rs 6,75,863.57 crore in June.
 

SHRINKING CORPUS
THE AAUM OF TOP FIVE MF PLAYERS (RS CRORE)

Fund house

June July % chg Reliance MF1,01,320.151,02,179.400.85 HDFC MF86,648.0984,628.20-2.33 ICICI MF73,795.4268,715.11-6.88 UTI MF64,445.6462,207.57-3.47 Birla Sun Life MF63,111.5561,532.69-2.50 Source : Association of Mutual Funds in India

Except Reliance Mutual Fund, all other top players saw a decline in assets. ICICI MF was hit the hardest, as its assets fell almost seven per cent. This was followed by UTI MF, whose AAUM declined 3.47 per cent. The assets of HDFC MF and Birla Sun Life MF were down by almost 2.5 per cent each in the month.

Jaideep Bhattacharya, chief marketing officer, UTI MF, said: “There was lower liquidity in the system. The money withdrawn by banks in June-end did not come back.”

Advance tax payment, coupled with auctions for 3G and Broadband Wireless Access, pulled down the assets of the mutual fund industry by over 1.25 lakh crore in June. This was the steepest decline since the October 2008 crisis. Industry experts said this time it would take longer than usual for funds to come back.

The chief executive officer of one of the top five players, who did not wish to be named, said: “The industry is in a pretty bad shape. I do not want to criticise the regulator for obvious reasons.”

July also marked the completion of one year of the entry load ban on mutual fund schemes.

With new debt valuation norms (marked-to-market) coming into force from August 1, industry players feel money will start moving to liquid schemes from liquid plus schemes. “However, the impact of the valuation norms may only be seen by the mid of this month,” said a fund manager.