Funds' assets under management up 3%

A slew of initial public offerings (IPOs) has helped the mutual fund industry to add over 3 per cent to its assets under management (AUM) in May.

In absolute terms, the industry added Rs 6189.75 crore to its AUM. This is in addition to almost 6 per cent or Rs 8,566.83 crore added in April, the first month of the new financial year.

In May, the biggest addition was from Fidelity Mutual Fund which started its operations in April 2005. Fidelity's AUM as of May 31 stood at Rs 1,495.4 crore.

Data available from the Association of Mutual Fund of India suggest that 23 of the 30 mutual funds witnessed a rise in AUM in May.

The biggest losers were LIC MF, which saw its AUM down by 10.2 per cent or Rs 327 crore, BoB Mutual saw its AUM down Rs 11.11 crore or 8.89 per cent, Sahara Mutual Fund, whose AUM was eroded by Rs 13.97 crore or 6.27 per cent, Standard Chartered MF's AUM was down by Rs 466.47 crore or 5.72 per cent and JM Financial MF's AUM was down by Rs 133.27 crore or 3.35 per cent.

ING Vysya Mutual Fund showed the biggest jump in AUM in relative terms, adding 30.04 per cent or Rs 444.83 crore, thanks to the lauch of its Mid Cap fund. The fund had mobilised around Rs 280 crore. Its AUM rose from Rs 1480.33 crore at the end of April to Rs 1925.17 crore at the end of May.

DSP Merill Lynch Mutual Fund saw its AUM rise by 13.5 per cent or Rs 840.49 crore from Rs 6,233.71 crore to Rs 7,074.2 crore. Alliance Mutual Fund added 12.8 per cent (Rs 151.87 crore), its AUM rising from Rs 1190.04 crore to Rs 1341.91 crore.

UTI Mutual Fund's AUM jumped 9.6 per cent (Rs 1965.3 crore) from Rs 20,478.44 crore to Rs 22,443.75 crore and Franklin Tempelton Investments' AUM rose by 8.6 per cent (Rs 1346.27 crore) from Rs 15,733.02 crore to Rs 17,079.29 crore.

Morgan Stanley MF added Rs 125.05 crore to AUM, HSBC MF added Rs 560.38 crore, Taurus MF added Rs 11.99 crore, Prudential ICICI MF added Rs 1042.05 crore, Reliance MF added Rs 527.02 crore, Kotak MF added Rs 336.17 crore and SBI Mutual fund added Rs 310.67 crore in May.

A leading distributor said, "The AUM of various MF's have jumped on back of fresh money they have mobilised through IPOs." UTI MF raised Rs 700 crore through an equity yield product recently. The money seems to be flowing into the market as MFs were net buyers of Rs 3,300 crore in May alone.

Meanwhile, equity funds posted their best returns in 2005 in May with average net asset value surging between 6.2 and 13 per cent as investors bet on a normal monsoon and the government renewed its privatisation plans, according to Reuters.

The annual June-September rains are critical for the overall health of Asia's fourth-largest economy as two-thirds of the country's hundred crore-plus people live of the land and the farm sector contributes a little over a fifth to gross domestic product.

Driven by domestic mutual funds - who have raised Rs 7,657 crore ($1.75 billion) through new schemes in the past three months - and renewed retail interest, stocks are now quoting near an 11-week high.

None of the 225 equity schemes mapped by fund tracking firm Value Research gave a negative return in the past month, as the benchmark Sensex jumped 9.11 per cent in May, down just 3.45 per cent from its life high stuck on March 9.

"Fresh money is driving shares," Dhirendra Kumar, managing director at New Delhi-based Value Research, said.

"Investors haven't seen a sharp pull-back in stock prices so far this year, so that is sustaining interest in new schemes," he said.

Local money has also replaced funds from overseas investors who pulled out $261.3 million in May as part of a move to pare holdings in emerging markets.

Investors also took heart from the coalition government's move to revive the nation's faltering plan to sell stakes in state-run companies.