MF assets under management rise four consecutive quarters to over Rs8 trillion

Indian mutual funds' average assets under management (AuM) rose by almost 4 per cent or Rs299 bn to Rs8.16 trillion in the January-March 2013 quarter from Rs7.87 trillion in the previous quarter (excluding fund of funds) as per the latest numbers released by the Association of Mutual Funds in India (AMFI).

This is the highest level since September 2010 when AMFI started declaring quarterly average numbers and the fourth successive quarterly gain in AuM.

AMFI has also started disclosing AuM of direct plans that were launched on 1 January 2013. These plans enable investors to invest directly through the fund house instead of through distributors. Returns of these plans are also higher than the regular plans owing to a lower expense ratio as they do not include distribution charges. The latest AMFI data indicates that average AuM of direct plans was around 15 per cent of the industry AuM, majorly from debt-oriented funds.

AuM of long-term debt and gilt funds gain on interest rate cut
Long-term debt and gilt funds posted a sharp rise in their assets in the March quarter due to inflows led by expectations that the Reserve Bank of India (RBI) would initiate monetary easing.

The RBI lowered its key lending rate, the repo rate, twice in the quarter (January and March) by 25 bps each to 7.50 per cent. Assets of long-term debt funds rose by 35 per cent to Rs855 bn while those of gilt funds gained by 63 per cent to Rs78 bn during the quarter ended March 2013.

On a year-on-year basis, the assets of these categories have risen by 345 per cent and 119 per cent, respectively.

Investor interest in the long-term debt category has risen lately as it benefits when the RBI cuts key interest rates. Bond prices and yields move in opposite directions. Accordingly, a fall in interest rates results in a rise in bond prices and positively impacts gilt and long-term debt fund NAVs (returns).

Equity funds' assets fall
Equity mutual funds' average AuM fell by 1 per cent in the March quarter to Rs2.09 trillion led by outflows and mark to market losses.

The underlying market, represented by the CNX Nifty, fell by 4 per cent during the quarter dragged down by concerns on economic growth as well as new concerns emerging in the euro zone.

Gold ETFs' average AuM up marginally
AuM of gold exchange traded funds (ETFs) rose by 1 per cent or Rs2 bn to Rs119 bn in the quarter, sharply lower than the 11 per cent rise seen in the previous quarter. The decline in growth was mainly due to drying up of inflows as well as mark to market losses. Investors have shied away from the category in recent months following a weak global trend in gold prices. Local gold prices, represented by the CRISIL Gold Index, fell by 2.4% in the latest quarter.

Chart 1 – Mutual fund quarterly average AUM trend

Table 1 – Category-wise average AUM (Rs bn)

Source - CRISIL Mutual Fund Database

Most fund houses post rise in average AM
AUM of 33 of the 42 fund houses (who declared their AuM) saw a rise in the quarter.

ICICI Prudential Mutual Fund registered the highest growth in assets in absolute terms by Rs 4 bn to Rs878 bn followed by Reliance Mutual Fund, whose assets rose by Rs39 bn to Rs946 bn in the quarter.

In percentage terms, BOI AXA Mutual Fund logged the highest rise of 67 per cent in assets to Rs 11bn.

AMCs which witnessed a fall in AuM included UTI Mutual Fund, whose average AUM fell by Rs 12 bn to Rs 695 bn, and L&T Mutual Fund, whose average AUM fell by Rs 9 bn to Rs 112 bn.

HDFC Mutual Fund back on top
HDFC Mutual Fund retained its top position by asset size at Rs 1.02 trillion in the March quarter.

Its assets rose marginally by 0.3 per cent or Rs3 bn in the latest period; Reliance Mutual Fund followed with assets of Rs946 bn (up over 4 per cent quarter on quarter) and ICICI Prudential Mutual Fund with assets of Rs878 bn (up 8 per cent quarter on quarter).

The share of top five mutual funds by AuM was 53 per cent in the quarter while the share of top 10 funds was 77 per cent. The bottom 10 fund houses continued to have a less than 1 per cent share of the average AUM.

Table 2 – Top 10 AMCs by average AUM (Rs bn)