MF average AuM rose to its highest level since quarter ended September 2010

Indian mutual funds' average assets under management (AuM) rose by 5.3 per cent or Rs392 billion to Rs7.87 trillion in the October-December 2012 quarter from Rs7.47 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 third consecutive quarterly gain in mutual fund assets.

The growth in assets in the latest quarter was primarily driven by inflows into income and gilt funds. Further, assets grew by 15 per cent or Rs1.05 trillion in the calendar year 2012 vis-à-vis 1 per cent growth in 2011.

Long-term debt and gilt funds rise on expectations of low interest rates
Long-term debt and gilt funds reported inflows on expectations of interest rate easing. The funds saw a sharp rise in their assets in the December quarter due to inflows led by expectations that the Reserve Bank of India  would lower its key interest rates in the near future.

The RBI, in its policy review of December 2012, had mentioned that the recent ebbing in inflation rates reinforces its guidance for policy easing in January-March 2013.

Assets of long-term debt funds rose by 62 per cent to Rs 632 billion while those of gilt funds gained by 48 per cent to Rs 48 bn during the quarter ended December 2012. Investor interest in the long-term debt category has risen in recent months as the category is expected to benefit if the RBI cuts key interest rates as prices (NAVs) and yields move in opposite directions.

A fall in interest rates will result in a rise in bond prices and positively impact gilt and long-term debt fund NAVs (returns).

Equity funds' assets rise by 4 per cent to Rs 2.12 trillion despite outflows
Equity mutual funds' average AUM rose by 4 per cent or Rs84 billion to Rs2.12 trillion in the quarter, which was in line with the underlying market movement. The S&P CNX Nifty rose by 3.5 per cent in the quarter.

However, growth in equity assets was capped due to profit booking by investors as the category witnessed outflows for six consecutive months, totaling Rs 106 bn, till November 2012.

Gold ETFs' average AUM up 11 per cent
Gold exchange traded funds' (ETFs') AUM rose 11 per cent or by Rs11 billion to Rs117 bn in the quarter as inflows continued into the category despite the fall in gold prices in the quarter. The CRISIL Gold Index was down by 3 per cent.

Assets of money market funds fall
Assets of money market funds (liquid funds) saw a marginal decline in assets by 3.5 per cent or Rs63 bn to Rs1.72 trillion as long-term debt categories have turned attractive for investors on expectation of an interest rate cut from the central bank. Further, quarter-end withdrawals by corporates to meet advance tax outflows added to the decline in assets.

35 out of 43 fund houses record rise in average AuM
About 80 per cent of the fund houses logged a rise in the average AuM in the December quarter. L&T Mutual Fund registered the highest growth in assets in absolute as well as percentage terms.

The fund house's assets grew by more than three times from Rs 39billion to Rs121 billion in the latest quarter mainly due to the addition of Fidelity's Mutual Fund's AUM post completion of its acquisition of the latter in December 2012. Fidelity Mutual Fund had reported an average AUM of Rs 71 bn in the September 2012 quarter as per AMFI data.

In absolute terms, ICICI Prudential Mutual Fund followed with its average assets up by Rs50 billion to Rs814 billion in the December quarter. In percentage terms, BOI AXA Mutual Fund recorded the second highest rise of 142 per cent to end with assets of Rs7 billion. Among losers, Daiwa Mutual Fund declined the most, in percentage terms, by nearly 32 per cent in assets to end the quarter at Rs 5 bn.

HDFC Mutual Fund retains its top AUM position
HDFC Mutual Fund retained its top average AuM position across fund houses in the December quarter with respect to total assets managed.

The fund's average AUM was up by Rs 36 bn or 3.7 per cent to Rs 1.01 trillion. Reliance Mutual Fund maintained the second position at Rs906 billion, up by 5 per cent or Rs43 billion.

ICICI Prudential Mutual Fund was ranked third in the asset tally at Rs 814 bn; its average assets were up Rs50 bn or 6.6 per cent (see Table 2).

The share of top 5 mutual funds' assets was 54 per cent in the December quarter while the share of top 10 funds' assets was 77 per cent. The bottom 10 fund houses continued to occupy less than 1 per cent of the AUM.

Chart 1 – Mutual fund quarterly average AUM trend

Source-AMFI

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

Source - CRISIL Mutual Fund Database

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

Source: AMFI