Fund assets growing faster than Sensex

The mutual fund industry has clocked growth of 41.7 per cent in the first nine months of 2007, outperforming the Sensex, which grew by 22.9 per cent during the same period.

Riding on the wave of strong inflows into debt schemes, mutual funds now have Rs 4,77,737.61 crore under management from Rs 3,37,089.94 crore in the beginning of this year.

The MF industry is now eyeing 15 per cent growth in assets under management (AUM), provided the markets hold ground during the period.

However, the growth in September at Rs 4,77,737.61 crore has been marginal, only 2.11 per cent compared with the August's figure of Rs 467432 crore. This was because MFs booked profit to declare dividends for the half year ending.

Although equities are the most preferred asset class, this year there has been a change in this trend with a lot of institutional money flowing into FMPs (fixed maturity plans) and liquid plus schemes.

The share of equities in total assets under management has fallen from 35 per cent to 27 per cent since the beginning of this year. Similarly, the contribution of debt has shot up from 26 per cent to 38 per cent, indicating the preference of investors. This year has also witnessed more debt NFOs than equity ones.

The equity markets have been quite volatile this year, falling first in February and then in July. With the Sensex near the 18,000 level, retail investors have become cautious. Some have even postponed their investment plans, unsure on the course the market would follow.

Says Mukul Gupta, chief investment officer, Birla Sunlife mutual fund, "Both asset classes i.e equity and debt have been increasing rapidly aided by the fast changing demographic profile of India. More wealth is being created now. Institutional business has also gained serious momentum. But having said that, the last month saw profit booking on the back of see-sawing market conditions."

Reliance mutual fund (Rs 70440.57 crore), ICICI Prudential mutual fund (Rs 50369.93 crore), UTI mutual fund (Rs 45002.62 crore), HDFC mutual fund (Rs 41333.40 crore) and Franklin Templeton mutual fund (Rs 30481.97 crore) continue to be the top five players in mutual fund industry.

This minuscule growth in AUMs this month, in spite of a startling performance by markets is basically due to advance tax outflows amounting to approximately Rs 30, 000 crore.