Credit policy uncertainty adds to AUM fall of Rs 22,000 crore last month.
After having risen for most of 2009, the average assets under management (AUM) of the mutual fund (MF) industry declined by 1.62 per cent to Rs 794,486 crore in December.
The fall was mainly due to banks withdrawing money from MFs. The industry had hit a high of Rs 8 lakh crore worth of assets in November. According to RBI data, banks’ investment in MFs was Rs 147,279 crore at the end of December 18, 2009, down by Rs 21,957 crore, or 17.5 per cent, between December 4 and then.
The sharpest decline in assets was registered by HDFC MF. Its AUM plunged 5.1 per cent from Rs 102,399.95 crore in November to Rs 97,183.8 crore in December. The assets of Reliance MF, the largest fund house, went down by 1.8 per cent to Rs 119,981.8 crore at the end of December. HDFC continued to remain the second largest fund house, followed by ICICI Prudential MF, which witnessed a decline of 0.35 per cent to Rs 82,432.2 crore in its average AUM.
UTI MF’s average AUM slipped 2.1 per cent from Rs 79,895.2 crore in November to Rs 78,203.4 crore in December. The fifth largest fund house, BirlaSunlife MF, saw its average AUM decrease 2.2 per cent to Rs 68,066.2 crore.
"Banks have withdrawn money from MFs at the fag end of the quarter because RBI was not happy with the circularity of funds. At the same time, there has not been much growth in equity assets. Markets, too, were flat during the month. Investors are taking a wait and watch policy for debt funds because there is a concern on interest rates. There is a lack of interest from IFAs (independent financial advisors) on selling mutual funds because of the load banm," said Kanwar Vivek, CEO, BirlaSunlife Distribution Ltd.
RBI had recently sought details from banks on their MF investments. Some banks had put internal limits on their MF exposure after the RBI governor expressed concern over circularity of money, saying it was finding its way to back to banks through the CBLO (collateralised borrowing and lending) route. According to rough estimates, banks account for a third of the liquid fund assets of the MF industry.
"Apart from banks withdrawing money, which is the main reason, equity redemptions would have also happened. A lot of investors are witnessing this as profit booking opportunity, since markets have shot up by more than 70 per cent during 2009. I do not expect major inflows into debt funds because investors are sitting at the sidelines, waiting for the next RBI action on credit policy. With inflation hanging heavily on the minds of everybody, people are expecting a hawkish stance from RBI this time," said Chintamani Dagade, Senior Research Analyst at Morningstar India.
Investors pulled out Rs 1,109 crore from equity funds in November. Since August, the category has seen net outflows of Rs 5,130 crore. Fund houses have been selling in the market to meet these redemption pressures. And, although there are a number of NFOs ( New fund offers) being launched, the fund mobilisation from new schemes has been quite poor, mostly in the range of Rs 200-500 crore.
While the industry had witnessed a record Rs 8.07 lakh crore AUM in November, the fact remains that it has been driven largely by inflows into debt schemes and rise in markets, which has boosted the value of assets. Banks had been a major contributor to the rise in industry AUM in November.
