Mutual fund assets continue to scale new heights

| Deepti Rajan

Assets under management (AUM) of the Indian mutual fund industry increased 1.45%, or by Rs 131 bn, in February to a record Rs 9.16 trillion, according to the monthly numbers released by the Association of Mutual Funds in India (AMFI). The spurt was primarily due to inflows into income and equity-oriented funds. On the other hand, liquid funds saw outflows, which eroded higher gains for the industry assets.

Income funds (long-term, short-term and ultra short-term debt funds; and fixed maturity plans or FMPs) logged inflows of Rs 129.6 bn – the highest since May 2013. Inflows, coupled with mark-to-market gains, helped income funds’ AUM rise 3.5%, or by Rs 152 bn, to Rs 4.48 trillion in February. The inflows were primarily into FMPs as investors continued to invest in the closed-end funds, lured by higher interest rates offered currently.

One-year commercial papers and certificates of deposit traded at 10.12% and 9.76%, respectively, on February 28, compared with 10% and 9.64% on January 31. The financial year-end typically sees a spurt in FMP launches as investors are drawn to the indexation and double indexation benefits these offer, depending on the tenure. In February, fund houses garnered Rs 213 bn by launching 128 FMPs compared with Rs 113 bn garnered in the previous month through 75 new launches. The category as represented by CRISIL – AMFI Income Fund Performance Index, CRISIL – AMFI Short Term Debt Fund Performance Index and CRISIL – AMFI Ultra Short Fund Performance Index gave 0.12%, 0.55% and 0.63% returns respectively in the month of February.

Equity funds (including ELSS funds) recorded inflows for the fourth consecutive month in February at Rs 5.82 bn, higher than Rs 4.27 bn in January. The category’s assets rose 3.3%, or by Rs 57 bn, to Rs 1.81 trillion, helped by inflows and mark-to-market gains. The benchmark CNX Nifty gained 3% on-month on positive domestic cues.

Fund of funds investing overseas saw inflows for the ninth consecutive month in February. At Rs 3.3 bn, the inflows were the most since May 2011 and together with mark-to-market gains pushed the category’s AUM up 17% (or Rs 4.66 bn) to a record Rs 31.94 bn. The category has caught investors’ attention as improving prospects of developed economies and a soft rupee has shored up returns.

Investors continued to exit gold exchange traded funds (ETFs) for the ninth consecutive month in February amid weak sentiment for the underlying asset class. The latest month saw outflows of Rs 1.78 bn compared with Rs 1.65 bn in the previous month. However, the category’s assets grew 3.7%, or by Rs 3.34 bn, to Rs 93.30 bn in February, helped by a consistent rise in gold price. The asset class, as represented by the CRISIL Gold Index, gained 5.71% in February following a rise in international prices.

Liquid funds’ AUM fell 3.15%, or by Rs 81.58 bn, to Rs 2.51 trillion due to outflows of Rs 96.29 bn during the month capping higher gains for the mutual fund industry assets.

Persistent worries over the Reserve Bank of India’s (RBI’s) monetary tightening continued to take a toll on gilt funds as the category witnessed outflows of Rs 9.37 bn in February – the highest since September 2013. The category’s assets ended the month Rs 9 bn lower at Rs 64.81 bn.