Mutual fund (MF) industry mobilisations during July 2001 was characterised by maximum inflows into liquid funds which mopped up funds worth Rs 8,000 crore, against the total inflow of Rs 11,646 crore into the sector during the month.
Income (or debt) funds came a far second with Rs 3,000 crore mop up while gilt funds saw people putting in Rs 500 crore with the rest flowing into equity and other funds.
According to industry sources, the reason for this distinct shift towards liquid funds is that these offer better options in terms of safe, steady and relatively high returns. On the other hand, equity market remained uncertain and gilt market was jittery with contradictory rumours on rate cut prospects. Together liquid and income funds have mopped up more than 94 per cent of money flowing into the sector in July.
Money market funds have been offering returns between 2-3 per cent over a three month period which translates into 8-12 per cent on an annualised basis. These returns have been steady over the past few months or so. Plus the added liquidity which these funds give also make them more attractive.
In June, it was the income funds which had drawn the maximum money into the sector with Rs 6,297 crore worth of inflow while the money market funds saw an inflow of Rs 5,991 crore, marginally behind the income funds. However, collectively both categories of schemes accounted for 93 per cent of the money coming into the funds sector.
Industry officials accounted for the reversal in the figures to the fact that most of the money flowing into the sector was anyway from the corporates who preferred to put their money into short-term funds - that is money market funds. Income funds were also attracting money but then it would be mostly retail money and then the absence of other investment options was forcing people - mostly retired people - to put their money into this segment.
