Mutual Fund assets fall 7 per cent in 2008-09

Data released by the Association of Mutual Funds in Inda (AMFI) demonstrate the country's mutual fund industry is not immune to the global downturn.

Mutual fund assets fell by 7 per cent by the end of 2008-09 over the previous year. The slump is severe compared to the tremendous growth of around 46 per cent on an average achieved for the past 5 years.

Average assets under management (AUM) grew over six times from Rs.79,000 crore in March 2003 to a whopping Rs.530,000 crore plus by the end of March 2008. However, the assets shrunk by Rs.37,000 crore to Rs.493,000 by March 2009, reflecting the fall in investor confidence.

During the period the BSE Sensex plummeted 38 per cent from 15,644 points to 9708 indicating substantial erosion of the net asset values (NAV) of the mutual funds, which not only reined the growth in assets but also resulted in the 7 per cent drop.

Of the 35 fund houses, 28 registered losses and the other 7 recorded gains in their AUM.

AMFI data reveals that during 2008-09, the top ten fund houses with a cumulative market share of around 80 per cent, five recorded considerable drops in AUM amounting to Rs.25,929 crore, whereas three recorded gains totaling Rs.33,409 crore. Two of the funds were more or less stable.

In percentage terms, Franklin Telmpleton Mutual Fund had a large loss of 28 per cent in AUM from Rs.26,822 crore to Rs.19,203 crore. Tata Mutual Fund dropped 13 per cent from Rs.19,679 crore to Rs.17,030 crore. The largest fund, Reliance Mutual Fund fell by about 11 per cent from Rs.90,938 crore to Rs.80,963 crore. SBI Mutual Fund too dropped close to 10 per cent from Ts.29,179 crore to Rs.26,383 crore and ICICI Prudential Mutual Fund, the third largest fund declined over 5 per cent from Rs.54,322 crore to Rs.51,432 crore.

Leading funds which bucked the trend by recording an increase in the AUM included LIC Mutual Fund which gained a whopping 64 per cent from Rs.14,056 crore to Rs.23,092 crore, Birla Sunlife 31 per cent from Rs.35,906 crore to Rs.47,096 crore and HDFC Mutual fund, the second largest fund rose 29 per cent from Rs.44,773 crore to Rs.57,956 crore.

Two funds which were relatively stable were UTI Mutual Fund which had a marginal drop of 0.4 per cent from Rs.48,952 crore to Rs.48,754 crore and Kotak Mutal Fund which increased 0.7 per cent from Rs.18,071 crore to Rs.18,204 crore.

Assests drop by 1.5 per cent in March

The monthly data indicate a marginal 1.5 per cent or Rs.7,686 crore drop in AUM after a 10 per cent increase in January and 9 per cent in February. The BSE Sensex climbed 11 per cent during the month.

Industry experts say that the drop in assets at the end of the fiscal year is a usual phenomenon. This is mainly due to redemption by banks and corporate houses for advance tax payments. It is believed that around Rs.50,000 crore redemption took place to meet the year end requirements.

Bucking the general trend, of the top five fund houses, HDFC Mutual Fund, posted an increase in its asset base by 1.9 per cent or Rs.1092 crore.
Reliance Mutual fund recorded a marginal drop of 0.81 per cent (Rs.664 crore). ICICI Prudential declined 3.8 per cent (Rs.2082 crore), UTI Mutual Fund 0.96 per cent (Rs.471 crore) and Birla Sunlife Mutual Fund 3 per cent (Rs.1460 crore) during the month.

Other leading fund houses which posted an increase in March are Kotak Mahindra Mutual Fund 5.5 per cent (RS.941 crore), IDFC Mutual Fund 5.6 per cent (Rs.763 crore) and Religare Mutual Fund 11.3 per cent (Rs.600 crore) and Fortis 5.5 per cent (Rs.321 crore).

Major losers include Tata Mutual Fund 11.8 per cent (RS.2,270 crore), SBI Mutual Fund 4.5 per cent (Rs.1,244 crore) and LIC Mutual Fund 4.8 per cent (Rs.1,176 crore).

Fund houses which were able to withstand the redemption pressure attribute the reason to better client penetration, their systematic investment plans (SIP) and new fund offers.

Nevertheless, industry is optimistic that April will see a reversal of the general trend.