MFs back on growth track

After facing a severe liquidity crunch in the later part of 2008, the mutual fund industry has shown signs of growth.

The industry’s average assets under management (AAUM) in January has gone up from Rs 421,116 to Rs 460,948 crore, a rise of 9 per cent. Birla Sun Life Mutual Fund has witnessed the highest growth among the top five asset management companies (AMCs) in percentage terms. Its AUM has shot up by 15.29 percent to Rs 42,157 crore from Rs 36,565 crore.

Out of the Rs 39,000-crore increase in AUM in absolute terms, the top five mutual funds have witnessed the maximum growth. “Most of growth is mainly due to a rise in debt assets,” said Anil Kumar, CEO, Birla Sunlife.

Analysts and distributors attribute this rise in assets to huge inflows received by income and gilt funds. With interest rates set to move downwards, corporate and government bonds have been rallying, making them one of the favourite investment options.

Income funds invest in a mix of government bonds and corporate debt, while gilt funds invest in only in government bonds. Prices of these debt instruments move up as interest rates fall, thereby increasing the net asset value (NAV) of the scheme that invests in them. The yield of 10-year government securities is currently ruling at 5.84 per cent.

Rupesh Nagda, Vice President-Mutual Funds at Motilal Oswal, said, “Assets under management have seen a sharp increase in January due to the huge inflows received by income and gilt funds. All classes of investors are putting money in these funds.”

Reliance Mutual Fund’s AAUM stood at Rs 76,168.48 crore, up 8.48 per cent from the previous month. HDFC continued as the second largest fund house with an AUM of Rs 51,420.73 crore. ICICI Prudential Mutual Fund saw the second-highest growth of 13.4 per cent in its AAUM. From Rs 41,877 crore in December, it went up to Rs 47,515.50 crore.

Similarly, UTI Mutual Fund witnessed an 8.49 per cent growth in its assets in January.

Contrary to this, smaller fund houses such as Edelweiss Mutual Fund and Bharti Axa Mutual Fund have seen sharp erosion in assets. Edelweiss’ AUM has fallen 58 per cent to Rs 31.76 crore from Rs 77.21 crore.

According to the Securities and Exchange Board of India (Sebi) data, mutual funds invested Rs 1,173 crore in debt instruments in January.

As opposed to this, their investment in equity was only Rs 117.50 crore.