Mutual funds break 3-month jinx

Average assets under management up 4.6% in December.

The mutual fund industry is set to break a three-month losing streak. Initial numbers for December indicate that the average assets under management (AAUM) has improved marginally.

According to the monthly data published by the Association of Mutual Funds of India (Amfi), the AAUMs are on the rise. Out of the 24 fund houses (total 37), which declared their numbers, 14 have shown an improvement in the AAUMs.

Market experts said that this could be largely due to the fact that investors are getting into gilt funds, which are likely to do better, in a falling interest rate regime. Also, the stock markets performed better, helping shore up the AAUMs.

In November, the total assets of these 24 fund houses was Rs 2.8 lakh crore, up 4.6 per cent, or over Rs 13,000 crore, to Rs 2.93 lakh crore. In December, the Sensex rose by 6.10 per cent and the Nifty by 7.41 per cent. Even the BSE-mid-cap and small-cap indices were up 12.10 per cent and 11.45 per cent, respectively.

Among the big players, Reliance Mutual Fund, which manages the largest corpus of Rs 70,000 crore, showed a 3.5 per cent rise in its assets. Others such as ICICI Prudential and LIC Mutual Fund’s assets have increased by Rs 4,821 crore (13 per cent) and Rs 2,715 crore (23 per cent).

Losers include Edelweiss Mutual Fund. The fund lost 53 per cent of its AAUM, from almost Rs 165 crore to Rs 77 crore. Bharti AXA Mutual Fund also saw a sharp dip in assets to Rs 280 crore from Rs 409 crore.

Despite the sharp fall in the market since January 2008, the mutual fund industry saw consistent rise their AAUM till May — from Rs 5.7 lakh crore to almost Rs 6 lakh crore till May-end.

This was primarily because investors, including companies and high net worth individuals, continued to pump in funds in Fixed Maturity Plans (FMPs), Liquid and Liquid-plus funds.

However, since May there has been a steady decline. Assets have already fallen by almost Rs 2 lakh crore — from Rs 6 lakh crore to Rs 4.01 lakh crore by November-end. October was particularly bad for the mutual fund industry when it lost Rs 97,000 crore in a single month.

This was because of a severe liquidity crunch, which forced a large number of corporates in need of working capital to exit Fixed Maturity Plans (FMPs), Liquid and Liquid-plus funds.

Even high net worth individuals moved out of such schemes because there were concerns that these schemes had invested in risky papers. Also, there was a mismatch in the maturity of the papers and schemes.

Both Amfi and the market regular the Securities and Exchange Board of India have stepped in since then with guidelines to regulate these schemes.