The average assets under management (AAUMs) of the mutual fund industry has dipped by 7 per cent in November, the third consecutive monthly fall, according to data released by the Association of Mutual Fund Industry (Amfi) on Tuesday.
With this, the AAUMs of the industry have fallen 26 per cent in the September-November period.
In November, the Bombay Stock Exchange (BSE) benchmark index, Sensex, fell 7.1 per cent. Fund industry officials said that this fall has largely been driven by market losses on equity portfolios.
“Assets have fallen as much as the equity market this month. There has been a flight to safety and quality among investors. However, the liquidity situation is better now, but investors are still concerned with the quality of the paper held in fund portfolios. In our case, 95 per cent of the book is in AAA+ securities. In fact, when the crisis was going on, we were net cash surplus,” said Jaideep Bhattacharya, chief marketing officer of UTI Mutual Fund.
Fund houses have sold Rs 3,598 crore of debt in November, down from Rs 26,081 crore in October, according to data provided by the Securities and Exchange Board of India (Sebi). In equity, fund houses were net buyers of Rs 1,432 crore in October, but they turned net sellers in November.
Last month’s fall was led by a wave of redemptions in debt funds after a liquidity crunch saw corporates rushing to redeem their investments.
| DOWNHILL JOURNEY AUMs of top mutual funds (Rs crore) | |||
| Fund house | Oct '08 | Nov '08 | % change |
| Reliance MF | 71,094 | 67,816 | -4.61 |
| HDFC MF | 45,479 | 44,262 | -2.67 |
| UTI MF | 38,284 | 38,358 | 0.19 |
| ICICI Pru MF | 39,182 | 37,056 | -5.42 |
| Birla Sun Life MF | 34,187 | 31,901 | -6.7 |
| Source: Amfi | |||
The AAUMs of the mutual fund industry declined by 18.37 per cent in October in comparison to the asset base in September. Since then, the Reserve Bank of India (RBI) has unveiled several measures to infuse liquidity into the system, including a cut in the policy rate and creation of a special window for mutual funds.
However, fund managers expect redemptions, especially from liquid funds, in December since advance tax payment for the third quarter is just around the corner. Further, many foreign institutional investors (FIIs) close their books for the year in December.
Smaller fund house that showed a decline in their November assets are: ING mutual fund (down 21.5 per cent to Rs 3,301 crore), Mirae Asset (down 69 per cent to Rs 309 crore), Edelweiss Mutual Fund (down 27.6 per cent to Rs 165 crore), Canara Robeco Mutual Fund (down 7.5 per cent to Rs 3,687 crore) and Fortis Mutual Fund (down 17.7 per cent to Rs 5,863.5 crore).
“The decline in November AAUM figures is due to redemptions of October 2008 and, therefore, is not attributable to any outflows/redemption in November,” said Arindam Ghosh, chief executive officer of Mirae Asset. “From here onward, we feel that the market could consolidate between 7,500 and 11,000. Further, the falling inflation will give policy-makers further room to introduce policy changes,” he added.
Financial advisors said that retail investors remained invested in mutual funds through the systematic investment plan (SIP) route.
“The wave of redemptions has happened and now, whoever is there is there for the long term. Normal redemption of 2-3 per cent will be there, but people are still coming in especially through the SIP route,” said Suresh Sadagopan, certified financial planner with Ladder 7 Financial Advisory.
