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January mutual funds assets rise, but no one's happy

Saturday, 8 February 2014 - 3:35pm IST | Agency: dna

AUM crosses Rs 9 lakh cr mark, but liquid funds the beneficiary

Numbers don't bare it all. Worse still, sometimes they do mask the real story.

The latest figures from the mutual fund industry is one example. The assets under management (AUM) for January have crossed the Rs 9 lakh crore mark, alright. But the Association of Mutual Funds in India (AMFI) data is actually a bad sign.

This is because AUM under liquid funds has risen by 43% on a month-on-month basis to Rs 2.59 lakh crore. 

Dhirendra Kumar of Value Research pointed out that these inflows into the liquid fund category are actually a sign of a poor economy. "The fact that people and companies are parking money in liquid funds clearly shows people are not keen on investing for the long term. They want to invest only for a short term and these are signs of poor investor confidence. Even if companies are making money, they are parking in short- term mutual funds, instead of investing," he added.

Short-term interest rates have been attractive and this has led to better yields from short-term funds, adding to their popularity, Kumar said. 

Other experts believe liquid-fund investments are dominated by institutional investors and retail participation is yet to pick up. The fact that both equity funds and balanced funds are finding tepid investor response proves retail investors continue to stay out.

AUM of equity funds has fallen by 3.9% from last month. Balanced funds, in fact, recorded an outflow of Rs 116 crore. Srikanth Meenakshi, co-founder, Fundsindia.com, explains that whatever little interest is there from the retail sector, it is mostly limited to the debt segment. 

Investors also continue to shun gold. Gold ETFs recorded an outflow of Rs 165 crore. Experts say rising gold prices are keeping investors on the sidelines. Gold prices have risen 3% in January.

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