Public sector mutual funds outshine foreign and private mutual funds

Public sector mutual funds have beaten private and foreign mutual funds (MFs) in asset moblisation during the past month. In July, the MF industry managed to show a Rs1,902-crore growth in assets thanks to whopping inflows of Rs1,592 crore into SBI Mutual Fund and UTI Mutual Fund. The total assets under management (AUM) of the industry is now Rs1.577 lakh crore.

While assets of SBI MF have grown by Rs844 crore to Rs6,140 crore, UTI MF's AUM has increased by Rs748 crore. UTI MF, the largest fund house in the country, has total assets of Rs21,638 crore as on July 31. This also includes the assets worth over Rs2,000 crore that came into the fund through the acquisition of IL&FS Mutual Fund, last month.

Interestingly, most of the leading private funds like Prudential ICICI MF, HDFC MF and Birla Sunlife MF have seen outflows during the past month. While Pru-ICICI's AUM dropped to Rs15,781 crore from Rs16,071 crore in the previous month, that of HDFC MF fell to Rs15,861 crore from Rs16,105 crore. Among the private players, Franklin Templeton and Standard Chartered MF have seen growth in their assets.

There were fears that the inflows into MFs would be lower due to confusion over tax proposals made by the finance minister in the union budget announced early last month. While the FM had removed capital gains tax for stocks, he did not specify whether it would be applicable to equity MFs also.

The Association of Mutual Funds in India had also submitted a memorandum to the finance minister seeking extension of the new capital gains regime to mutual fund units as well. The government later accepted the request and clarified that the same treatment will be applicable to MF units as well.

Though there was confusion over the tax treatment announced in the budget, there were good inflows in MFs during the month. However most of the fund flows were into liquid schemes and floating rate funds. As there is volatility in debt market, most of the investors are moving out from long-term bond funds to short-end products and floating rate funds in order to protect capital. Over the last two months liquid funds have emerged as the largest assets group in fixed income products overtaking income funds.

The total AUM of liquid funds stand at Rs67,079 crore, income funds have Rs56,236 crore.

Floating rate funds are also beginning to attract large inflows. It is estimated that floating rate funds now have about Rs2,000 crore. Most of the fund houses have launched floating rate funds over the last few months. Over Rs1,500 crore has come in through the IPO of three floating rate funds from Standard Chartered MF, Kotak MF and SBI MF.