Cash-strapped banks dent MF asset kitty

The liquidity crunch faced by banks wiped off 5.11 per cent from the domestic mutual fund industry's assets value in December, as banks withdrew their investments mostly from liquid funds to meet their currency needs.

The assets under management (AUM) value of mutual funds eroded by Rs 16,548.47 crore to Rs 3,23,601.71 crore compared with Rs 3,40,150.18 crore in November.

This was the biggest of the three falls witnessed by the sector during 2006. In June last year, the AUM size of the MF industry narrowed down by 3.64 per cent, while another 5.44 per cent drop in September followed the heavy redemptions that had taken place towards advance tax payments.

Among the 30 mutual fund houses, 23 saw their assets value whittle away, while a few, such as Reliance MF, gained during December 2006. While Reliance gained the most last month, LIC MF became the top loser.

Reliance MF, which grabbed the second spot beating Prudential ICICI in terms of the AUM size by the end of the year, is now the top private sector fund house in the country.

"After the CRR hike reduced the cash with banks, it was expected that banks would redeem their investments in mutual funds. Normally, banks pour most of their mutual fund investments into liquid funds. But we don't see any panic situation," Subhash Bagaria, research associate, Angels Broking, said.

However, he added, banks would once again invest in liquid funds, as these funds were giving better returns than debt funds.

UTI lost nearly 9 per cent of its asset size in December, even though it maintained its top position. Prudential ICICI, on the other hand, witnessed a fall of 3.84 per cent in AUM. HDFC MF, whose AUM gained a marginal 0.84 per cent last month, stood at the fourth place.

The fund achieved 68 per cent growth during 2006. SBI MF, which is expected to have mopped up around Rs 2,000 crore from its recently closed One India scheme, saw its AUM erode 5.5 per cent in December.

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RUNNING FOR COVER

The assets under management value of mutual funds eroded by Rs 16,548.47 crore to Rs 3,23,601.71 crore compared with Rs 3,40,150.18 crore in November

Among the 30 mutual fund houses, 23 saw their assets value whittle away, while a few, such as Reliance MF, gained during December 2006

UTI lost nearly 9 per cent of its asset size in December, even though it maintained its top position. Prudential ICICI, on the other hand, witnessed a fall of 3.84 per cent in AUM