The equity market meltdown and the large outflows from fixed income schemes due to rising interest rates has take its toll.
MFs see erosion of Rs 10,078.16 cr after market meltdown, rising interest rates.
MUMBAI: The equity market meltdown and the large outflows from fixed income schemes due to rising interest rates have take a toll on assets under management (AUM) by mutual funds (MFs).
According to the latest Association of Mutual funds of India (Amfi) data, the AUM of India’s 29 MFs have shrunk by more than Rs 10,000 crore.
The month-ended June 2006 saw the industry AUM fall by Rs 10,078.16 crore or 3.7% to Rs 2.66 lakh crore. At the end of May 2006, the figure was Rs 2.76 lakh crore, the highest ever recorded by the industry. The last time the industry witnessed an AUM drop was in December 2005, when it had gone down by Rs 5,271 crore. Ever since it has been on the rise, till it hit a roadblock in June.
“Apart from the equity market meltdown and rising interest rates, increased advance tax payments due to the quarter end, also played their part in the AUM fall over June,” said Sameer Kamdar, national head for mutual funds, Mata Securities. In terms of percentage drop, BoB MF topped the charts with a 29.6% decline. In absolute falls, Birla Sunlife Mutual Fund lost Rs 2,381.49 crore.
A distributor said that the largest AUM drop among equity schemes would be in those having a predominantly mid- and small-cap bias. Besides, rising interest rates saw the prices of fixed-income assets eroding. This meant that some fixed income (debt) schemes started giving negative returns, which, in turn, led to redemptions.
And to add to debt schemes’ woes, some banks had started offering very attractive deposit rates towards the end of June.
A select few asset management companies managed to buck the trend, though it was marginal. LIC Mutual Fund (AUM up 12.4%), Standard Chartered MF (12%), Tata MF (6.6%), HDFC MF (3.1%), HSBC MF (2.7%), Deutsche MF (2.1%) and Principal Pnb MF (0.5%) were among the MFs which witnessed a rise in AUM .
Prudential ICICI Mutual Fund just about managed to retain its No. 1 ranking in terms of AUM, which it had achieved in May by displacing UTI Mutual Fund.
However, the gap between AUMs of the top two fund houses narrowed to just Rs 27.30 crore as at the end of June, as compared to Rs 1,599.93 crore as at the end of May. PruICICI MF’s AUM dropped to Rs 30,142.62 crore, while UTI Mutual Fund closed the month down at Rs 30,115.2 crore.
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