Mutual Fund assets rise to Rs 25.43 trn in May, FMPs outflow continues

Fixed Maturity Plans (FMP) witnessed outflow for the second straight month in May as investors pulled out Rs 1,797 crore from the schemes, amid many non-banking finance companies grappling with debt woes.

However, latest data from industry body Amfi Monday showed that average Assets Under Management (AUM) of mutual funds rose to Rs 25.43 trillion in May from Rs 25.27 trillion in the previous month on the back of increased inflows into equity-linked schemes.

In May, retail investment through Systematic Investment Plans (SIPs) declined to Rs 8,183 crore from Rs 8,238 crore in April.

FMPs, which invest in debt instruments like corporate bonds, recorded an outflow of Rs 1,797 crore last month. In April, the outflow stood at a whopping Rs 17,644 crore.

In recent months, the mutual fund industry has been grappling with redemption pressures in the wake of debt crisis at various groups, including IL&FS, Essel and DHFL.

Data from the Association of Mutual Funds of India (Amfi) showed that overall net outflow in close ended debt oriented schemes stood at Rs 2,001 crore in May.

"Investor confidence in FMPs is at an all-time low. The investment has fallen by Rs 2,000 crore in this category.

"The recent IL&FS fiasco followed by the DHFL fiasco mostly affected FMPs in the debt fund category leading to many schemes being down by more than 10 per cent - which is extremely poor for a debt fund (considered low risk)," said investment platform Groww.in COO Harsh Jain. 

Equity mutual funds witnessed a rise of 17.33 per cent in inflows to Rs 5,407 crore in May compared to Rs 4,608.74 crore seen in the previous month. Overall net inflows in open ended schemes stood at Rs 70,119 crore.

"The retail fund flows would now further strengthen on the back of political stability, promise of further economic reforms and improving macro-economic environment coupled with healthy corporate earnings growth," Amfi CEO N S Venkatesh said.

According to him, continued retail investor confidence through SIPs has now set a new normal with monthly flows consistently crossing over Rs 8,000 crore.

On the other hand, credit risk fund recorded an outflow to the tune of Rs 4,155 crore last month, higher than Rs 1,253 crore seen in April.

"While SIP numbers are still strong, there was some profit booking given the markets made new highs.

"Now that the election overhang is over, we expect investors should come back to making greater quantum of investments into equities, although higher valuations will continue to remain a hurdle" said Kaustubh Belapurkar, Director-Manager Research at Morningstar.