Sliding equities, liquidity crunch cause dip in mutual fund AUMs: CRISIL

The Indian mutual fund industry's average assets under management (AUM), including fund of funds, declined by 6.6 per cent to Rs5.31 trillion in March 2008, from Rs5.69 trillion recorded in February 2008.

According to Krishnan Sitaraman, head, CRISIL FundServices, "Falling equity markets, corporate advance tax outflows, and redemptions from short term debt plans by institutional investors ahead of the financial year end on 31 March took a toll on mutual funds' assets in the month. To some extent, this was cushioned by inflows through fixed maturity plans (FMPs) offering double indexation benefits."

Performance of CRISIL's Mutual Fund Indices
Among CRISIL's mutual fund indices, the short-term debt indices managed to end with positive returns during March 2008.

The liquid fund index, CRISIL~LX, which was up by 0.68 per cent, gave the highest returns.

It was closely followed by the CRISIL STBEX (which serves as a benchmark for short-term bond funds), which gave 0.67 per cent absolute monthly returns.

All other CRISIL mutual fund indices ended in negative territory.

CRISIL Fund~dX, the long-term bond funds index, posted negative returns of 0.15 per cent, while the  CRISIL MF~Gilt index, the gilt funds index, ended 1.46 per cent in the red.

Among indices with equity components, CRISIL MIPEX, the index used as a benchmark for monthly income plans, showed the least decline, with negative returns of 1.37 per cent in March.

This was followed by CRISIL Fund~bX, the index for balanced funds, which dropped almost 10 per cent.

CRISIL Fund~eX, the index for diversified equity funds, saw the maximum fall, of 12.36 per cent, during the month under review.

Key Developments in the Mutual Fund Industry
Barring Birla Mutual Fund (average AUM up by Rs12 billion), all fund houses registered a dip in their AUM in March. Reliance Mutual Fund retained its top position in the asset tally, with average assets of Rs909 billion.

Capital market regulator, Securities and Exchange Board of India (SEBI), announced that short selling in the spot market by institutional investors (including mutual funds) and a full-fledged securities lending and borrowing programme for all market participants would become operational from April 21.

The short selling will be initially restricted to those stocks that are part of the futures and options segment. SEBI also directed mutual funds not to charge entry or exit load on bonus units and units allotted on reinvestment of dividend, effective from April 1, 2008. Also, the Reserve Bank of India raised mutual funds' overseas investment limit to $7 billion from $5 billion.