The change in assets under management of the Indian mutual fund industry is as erratic as the money flowing in and out of the debt-oriented categories. While the scenario in the month of April re-emphasised the same, the over dependency of the industry’s asset growth on debt-oriented funds remained undisputed.
Hence, it’s not surprising to see the industry’s asset base swell by 17.7% in the month of April, given the debt-oriented categories (Liquid, Income and Gilt) cumulatively witnessed net inflows to the tune of Rs 106,890 crore. The cause was further aided by the favourable market conditions both in equity as well as fixed income markets. March, however, was the month in contrast, when the net outflows from debt-oriented funds and challenging conditions in the equity and debt markets dented the industry’s asset base by almost 14%.
Having said that, both, fall in assets in March as well as surge in assets in April, are predictable events. March, which happens to be the quarter-end month, typically witnesses net outflows on account of corporates redeeming their investments from liquid as well as ultrashort-term bond funds in order to meet their advance tax payment obligations. On the other hand, April which is the following month usually sees money flowing back into these funds.
Among various mutual fund categories, except for FOF Overseas and Gold ETF, all the others witnessed growth in their asset base. While Liquid fund category was the biggest beneficiary in April, Gold ETF was the worst hit.
Debt-oriented funds propel growth
The task of bailing the industry’s asset size out from the trough it touched in March was once again shouldered by debt-oriented funds. Among the three categories that fall under the gamut of debt funds, Liquid fund category benefitted the most. Its assets grew by a robust 97.2% to Rs 184,195 crore from the previous month’s close of Rs 93,392 crore. The surge in its assets could be attributed to the net inflow of Rs 85,745 crore the category received in April. It’s noteworthy that the category was the worst performer in March as it witnessed a massive 54% drop in assets on the back of net outflow of Rs 109,789 crore.
The assets of Income category also grew by 6.6% during the month to end at Rs 422,300 crore as against Rs 395,985 crore in March. The category received a net inflow of Rs 20,159 crore in April. Clearly, with advance tax payments over in March, corporate and institutional investors pumped in money into the funds from these categories.
Further, after witnessing an outflow of Rs 167 crore in March, Gilt fund category gained traction again this month. On the back of net inflow of Rs 986 crore, the category saw its assets grow by 13.7% to Rs 9,181 crore as against the previous month’s close of Rs 8,074 crore.
Evidently, the falling interest rate scenario in the country has made gilt funds, especially long-term focused ones, highly attractive for investors. With economy still struggling to gain ground and inflation showing signs of easing, the central bank, taking a note of the same, has cut the repo rate by 75 bps this year so far. This has benefitted long-term gilt as well as income funds immensely.
The contribution of Liquid category to the overall industry’s asset base surged to 23% in April 2013 as against 14% as on April 2012. Subsequently, debt categories continued to rule the roost, with the three categories together contributing around 75% to the industry’s asset base as of April 2013.
Surge in equity markets rescue equity-oriented funds
While the debt-oriented categories saw huge net inflows in the month of April, their equity counterparts were marred by net outflows. While Equity and Balanced categories saw net outflows of Rs 80 crore and Rs 4 crore respectively, ELSS was the worst hit category among equity categories with net outflows of Rs 190 crore.
Despite that, the assets of all the three equity categories surged, thanks to the rise in equity markets during the month. Through April, the 30-share S&P BSE Sensex climbed 3.5% while the broader 50-stock NSE Nifty rose 4.3%. Subsequently, the assets of Equity, Balanced and ELSS categories surged by 3.6%, 5.0% and 3.2% respectively in April. Balanced funds, given their allocation to fixed income instruments, benefitted from the rally in the fixed income market as well.
The rough patch continues for Gold ETFs
Falling gold prices and net outflows dented the asset base of the Gold ETF category by 8.7% during the month. The category has been seeing net outflows over the last three months (including April). While investors have been wary of investing in gold-oriented funds of late owing to the continuous fall in gold prices globally, they are also resorting to redeeming their investments at current levels.
As on April 2013, the category’s AUM stood at Rs 10,629 crore as against Rs 11,648 crore at the end of the previous month. It saw net outflows to the tune of Rs 36 crore in April. The category saw net outflows of Rs 8 crore and Rs 87 crore in the months of February and March respectively.
FMP launches slow down – expectedly!
The launch of Fixed Maturity Plans (FMPs) that gained pace in the past few months slowed down in April. Around 16 FMPs were launched in the month of April, which cumulatively garnered around Rs 2,700 crore. In March, around 119 FMPs were launched which garnered around Rs 21,581 crore. Usually the launch of FMP gains pace towards the end of a financial year as fund houses launch FMPs with maturity spanning over two financial years, so that investors can avail double indexation benefits. Hence, through the quarter ended March 2013, approximately 187 FMPs were launched which cumulatively garnered Rs 34,065 crore. But with FY 2012-13 over, the launch of FMPs has also gone drastically down. However, with interest rates treading southwards, fund houses may continue launching FMPs for some more time in order to lock yields at prevailing levels.