Mutual fund assets reach all-time high in October: CRISIL

Assets under management (AuM) of Indian mutual funds closed at an all-time high of Rs5.60 trillion at the end of October 2007 - a sharp rise of more than Rs800 billion over the September-end AUM of Rs4.80 trillion, or a 17 per cent month-on-month growth.

The industry AUM crossed the Rs5-trillion mark for the first time. All 32 fund houses recorded an increase in their AuM during the month.

"The increase in AUM can be attributed to the rise in the stock market, large corpus raised by new fund offerings, lower redemptions, and availability of liquidity in the banking industry, which saw short-term fund flows into liquid schemes," says Krishnan Sitaraman, head, fund services and fixed income research, CRISIL.

"Investors, who withdrew money from equity schemes fearing a sharp correction when the benchmark indices were scaling new highs, typically reinvested these funds into liquid and liquid-plus plans," adds Sitaraman.

" Reliance Mutual Fund continued to be the largest fund house, with its AUM rising to almost Rs800 billion in October
" ICICI Prudential Mutual Fund was at the second spot, with an AUM of Rs563
billion
" UTI Mutual Fund came in third with an AUM of Rs518 billion
" A key entrant into the top-five list was Birla Sun Life Mutual Fund, with an asset base of Rs337 billion, surpassing Franklin Templeton Mutual Fund''s asset base of Rs323 billion
" In percentage terms, AIG Global Investment Group Mutual Fund saw the maximum AuM growth of 81 per cent to Rs41.40 billion
" Canara Robeco Mutual Fund saw a 51 per cent AUM growth to Rs33.46 billion.

A couple of mutual fund regulations that came into effect in October 2007 are worth noting. For one, the quota for mutual funds in public offers of equity shares was hiked in order to promote retail investments in share markets.

Second, the Securities and Exchange Board of India (SEBI) relaxed the duration of short-term investments by mutual funds in bank deposits to 182 days from the earlier limit of 91 days. This will give greater flexibility for mutual funds to choose the deposit option to park their money in and get slightly higher yields without any material impact on duration.

Key developments:
" One of the key developments in the mutual fund industry during the month was UTI Mutual Fund''s proposal to file the prospectus for its initial public offering by December 2007.
" In another development, HDFC Ltd (HDFC) bought an additional 10 per cent stake in HDFC Asset Management Company (HDFC AMC) from its UK partner Standard Life. HDFC will now hold a 60 per cent stake in HDFC AMC, while Standard Life will hold the balance 40 per cent.
" In other key developments, the Foreign Investment Promotion Board cleared the proposal of Goldman Sachs to set up an AMC in India
" Axis Bank has proposed to set up an AMC
" Bank of Baroda and Pioneer Investments signed a deal for carrying out a mutual fund business
" Geojit Financial Services launched an online trading platform for mutual funds.

All CRISIL mutual fund indices ended October 2007 not only on a positive note, but also gave higher returns than they did in the previous month.

" CRISIL Fund~eX (the index for equity funds) posted the highest returns (13.75 per cent) on the back of an upbeat stock market.

" CRISIL Fund~bX (the index for balanced funds) had returns of 10.45 per cent, and CRISIL MIPEX (the index for monthly income plans) had gains of 3.54 per cent.

" Among debt indices, CRISIL Fund~dX (the long-term bond funds index) gained the most, with a 1.03 per cent growth, followed by
" CRISIL STBEX (the index for short-term bond funds) with gains of 0.89 per cent

" CRISIL MF~Gilt (the gilt funds index) was not far behind and gained 0.85 per cent, while

" CRISIL~LX (the index for liquid funds) gained 0.66 per cent.