MF assets hit new highs on equity, income schemes

Income funds, according to a CRISIL report, saw their highest inflows since May 2013

The amount of money managed by the mutual fund (MF) sector hit record levels in February, at Rs 9.16 lakh crore.

This was largely driven by inflows into equity schemes and income funds, even as outflows from liquid funds proved a drag on assets, according to a CRISIL report.

Income funds saw their highest inflows since May 2013, it noted.

“The inflows were primarily into FMPs (fixed maturity plans), as investors continued to invest in the closed-end funds, lured by higher interest rates. One-year commercial papers and certificates of deposit traded at 10.12 and 9.76 per cent, respectively, on February 28, compared with 10 per cent and 9.64 per cent on January 31. The financial year-end typically sees a spurt in FMP launches as investors are drawn to the indexation and double indexation benefits these offer, depending on the tenure,” it said.

Also, “Equity funds (including equity-linked savings scheme funds) recorded inflows for a fourth consecutive month in February at Rs 5.82 billion, higher than the Rs 4.27 billion in January. The category’s assets rose 3.3 per cent or by Rs 57 billion, to Rs 1.81 trillion, helped by inflows and mark-to-market (asset revaluation) gains,” said the report.

Global fund-of-funds, or schemes which invest their money in global MF schemes, also saw inflows hit a multi-year high. These were the highest since May 2011, at Rs 330 crore. Better prospects for developed economies and a weaker rupee had drawn investors to the segment, says CRISIL.

Investors continued to exit gold exchange-traded funds for a ninth month in a row, with outflows rising to Rs 174 crore, higher than Rs 165 crore in January. Gold prices rose 5.7 per cent in the month.

Liquid funds saw outflows of Rs 9,629 crore during the month and assets under liquid schemes dropped to Rs 2.51 lakh crore. Funds investing in government bonds or gilt funds saw outflows hit their highest since September, on fears over the Reserve Bank of India’s liquidity tightening programme.

“Persistent worries over the Reserve Bank of India’s (RBI’s) monetary tightening continued to take a toll on gilt funds, as the category witnessed outflows of Rs 9.37 billion in February, the highest since September 2013. The category’s assets ended the month Rs 9 billion lower at Rs 64.81 billion,” said the report. The rise in inflows comes even as the Securities and Exchange Board of India announced a long-term policy for MFs, in February. It proposed introduction of an MF-linked retirement plan, which it estimates could add Rs 18,000 crore in yearly inflows. It has also suggested the government allow all public sector entities to invest in MFs, a move which potentially opens another Rs 2.74 lakh crore in capital for the sector to tap.