NFOs bring back interest in equity Mutual Funds

Newly-launched Axis Mutual Fund’s equity assets at Rs 712 crore.

Mutual fund houses can now breathe easy. Since the ban on entry load from August 1, 2009, they were seeing a fall in their assets under management (AUM) in the equity segment. However, in January, the net inflow into equity funds was Rs 980 crore. And, equity-linked saving schemes (ELSS), which are eligible for tax deductions under Section 80C, saw net inflows of another Rs 268 crore, according to data from ICRA Online.

The numbers were boosted by collections from three new fund offers (NFOs). Axis Mutual Fund, which launched its Axis Equity Fund NFO and Tax Saver, collected most of this money (Rs 712 crore).

Rajiv Anand, chief executive officer, Axis Mutual Fund, said, “Money has started flowing into the equity segment. Apart from these inflows, redemptions have come down. This shows investor confidence in the equity segment from a long-term perspective.”
 

NUMBER GAME
Mutual Fund Name	Total equity (Rs cr)		Change
	Dec '09	Jan '10
Axis MF	0.14	713.02	712.89
Sundaram BNP Paribas MF	9,815	10,439.72	625.01
Birla Sun Life MF	9,952	10,274.96	323.25
HDFC MF	22,361	22,661.15	300.05
UTI MF	22,097	22,372.99	275.69
SBI MF	18,866.90	19,116.52	249.62
Reliance MF	36,858.26	37,065.33	207.07
DSP Blackrock MF	10,572.19	10,758.08	185.89
ICICI Prudential MF	15,051.87	15,160.53	108.66
Franklin Templeton MF	13,679.95	13,769.63	89.68
Source: ICRA ONLINE

Even distributors are now showing enthusiasm in pushing equity products. They had lost interest in equity schemes after the entry load ban. “High visibility, higher commission for distributors and investors’ belief that they are buying units cheap (at Rs 10 face value) led to the success of these NFOs,” said a mutual fund distributor. Fund houses pay 1.5-2 per cent upfront fees in NFOs.

Sundaram BNP Thematic launched its PSU Opportunities Fund during the month. Its equity AUM rose by Rs 625 crore to Rs 10,440 crore in January.

The other fund houses which collected over Rs 100 crore include HDFC Mutual Fund, UTI Mutual Fund, SBI Mutual Fund and Reliance Mutual Fund.

A chief investment officer of a leading fund house said, “The markets are not expected to fall very sharply from these levels. A lot of money is waiting to be invested in mutual funds and this trend reversal, I believe, should continue in the coming months.”

An equity head of a mid-sized fund house said sales significantly improved in January. In December, total sales in the equity segment stood at Rs 4,047 crore, which rose to Rs 7,837 crore in January, according to the monthly statistics from the Association of Mutual Funds in India. “This is a healthy sign and signals a revival in equity schemes,” he added.

It is not that only NFOs are seeing inflows. “Even post NFO, we have been witnessing regular inflows into equity schemes,” said Anand.

In January, the mutual fund industry’s net inflows stood at Rs 97,242 crore. The debt segment continued to contribute the highest (Rs 1,06,092 crore). However, there were net outflows from liquid, money market and gilt funds.