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The first six months of 2015 have been robust for domestic mutual fund houses, as they have seen a massive rise of Rs 1.22 lakh crore in their assets under management (AUM) - the most in six years.
With this up move, the average AUM has decisively surpassed the historical high of Rs 12 lakh crore-mark. Mutual fund assets during the same period last year stood at less than Rs 10 lakh crore. The current AUM size is three times compared to December 2008 low of Rs 4.18 lakh crore.
Incessant high inflows in equity segment amid strong sentiment in the stock markets helped the 44-player fund industry gain considerable size. Now, India has two fund houses - HDFC Mutual Fund and ICICI Prudential AMC - which have attained assets worth Rs 1.5 lakh crore. If the current momentum continues, two more players - Reliance Mutual Fund and Birla Sun Life Mutual Fund - would soon make an entry in the Rs 1.5 lakh crore asset category.
Interestingly, in the first half of the 2014, when the country was closing in for the Lok Sabha elections, the fund industry had added Rs 1.1 lakh crore in its asset base. However, the current year appears to be far more robust than the previous one.
According to data available with the Association of Mutual Funds in India (Amfi), such a rising trend in the first half of the year was witnessed in 2009, when assets rose by Rs 2.5 lakh crore. Prior to it, 2007 saw an asset rise of Rs 2.73 lakh crore in the first half of that year. However, then, mutual funds were not as much regulated as they are now. The entry load was also not abolished in the pre-Lehman crisis phase.
Experts believe mutual funds have to play a bigger role as domestic money has started flowing in through them into the stock market. Being one of the most transparent investment products and an easiest vehicle to take exposure in the stock markets and other asset classes, mutual funds are beginning to see more traction among retail investors than ever before.
Earlier this year, Sunil Singhania, chief investment officer (CIO) of Reliance Mutual Fund, had told Business Standard, “Last year, net investments by equity fund managers was the highest in the sector's history... We are just scratching the tip of the iceberg. India's gross domestic product is $2 trillion. Total cumulative value of savings in India is $23 trillion. The wealth in Indians' hand is almost equivalent to the market capitalisation of India, at $22-23 trillion. Of that, $12 trillion is in real estate, $7-8 trillion in fixed income, $2 trillion in gold and silver and diamond, and only $300-400 billion in equities. As a percentage of total wealth, we have only 1-1.5 per cent in equities. So, sky is the limit.”
Singhania’s views turn out to be true. In the previous calendar year, the net inflows in equity segment were a little less than Rs 50,000 crore. The inflows in the first six months of 2015 are almost at par with last year's.
This has enabled fund managers to remain net buyers throughout this year. For instance, in the first half, their net investment in stocks is nearly Rs 31,000 crore. Despite nearly a 10 per cent corrections amid steep volatility, fund managers have used the dips to pump in money.
According to Mahesh Patil, co-chief investment officer at Birla Sun Life Mutual Fund, said: “We believe we are in a bull market in India. Such markets are prone to steep corrections. There were 13 corrections in the bull market of 2003-2008. This was the first double-digit correction since September 2013. It is not easy for an economy of our size to turn around quickly. There will be phases where some market participants might lose belief in a turnaround and exit. Those would be a good buying opportunity for others.”
