Mutual fund assets record largest decline since December 2010

Indian mutual funds' average assets under management (AUM) fell by 4.5 per cent or Rs384 billion to Rs8.08 trillion during the quarter ended September 2013 compared to Rs 8.47 trillion in the previous quarter (excluding fund of funds) the latest figures released by the Association of Mutual Funds in India (AMFI) reveal.

The quarter marked the sharpest fall in mutual fund assets since December 2010 as investor sentiments were hurt due to volatility in equity and debt markets following the weak Indian currency. On the category front, money market and ultra short term debt funds' AUM declined by Rs231 billion and Rs183 billion, respectively, while equity funds lost Rs127 billion.

However, fixed maturity plans (FMPs) saw inflows of Rs142 billion in the quarter on the back of rising yields. Most mutual fund houses (34 out of 44) recorded a fall in their assets during the quarter. Share of direct plans increased marginally over the quarter to 26 per cent of the industry's AUM vis-à-vis 25 per cent in the previous quarter.

AUM of money market and ultra short-term debt funds post record fall
Consolidated assets of money market and ultra short term funds saw a fall of Rs414 billion in the latest quarter, the biggest loss for the combined categories since the AMFI started declaring average AUM numbers in September 2010.

The fall in assets was due to heightened volatility in the categories post the liquidity tightening measures announced by the Reserve Bank of India (RBI) since mid-July 2013 to curb the fall in the Indian rupee. AUM of liquid/ money market funds fell by 12 per cent or Rs231 bn to Rs1.71 trillion while AUM of ultra short-term debt funds fell by 17 per cent or Rs183 billion to Rs869 billion during the quarter.

FMPs witness sharpest rise in assets since March 2011 quarter
Assets of FMPs rose by Rs142 billion in the latest quarter, the highest gain recorded by the category since January-March 2011, as investors chose the category to benefit from the rise in yields (an outcome of the liquidity tightening measures by the RBI).

The benchmark 10-year government bond yield touched a 5-year high of 9.23 per cent during the quarter and ended at 8.77 per cent as on 30 September 2013; the yield was at 7.44 per cent as on 28 June 2013.  As many as 159 of the 167 new fund offers (NFOs) launched during this period were FMPs compared to 54 FMPs launched in the previous quarter.

FMPs are closed-ended debt oriented mutual funds which lock in the high yields over the period of the scheme. They also provide tax benefits in terms of indexation (where returns are adjusted for inflation) if held for more than one year.

Equity funds' assets saw highest fall in the past seven quarters
Equity mutual funds' average AUM fell by 6 per cent or Rs127 billion – highest fall in the last seven quarters – to Rs1.86 trillion in the September quarter led by outflows and mark to market (MTM) fall. The underlying market, represented by the CNX Nifty, fell by 2 per cent during the quarter due to adverse global and domestic economic cues.

Gold ETFs' average AUM saw a marginal rise
Gold ETFs saw a 1 per cent rise in assets due to MTM gains as local gold prices, represented by the CRISIL Gold Index, rose over 18 per cent during the quarter.

The rise in domestic gold price was aided by an increase in global US dollar denominated gold price, and weakening of the Indian rupee against the US dollar.

The category, however, saw redemptions of Rs7 billion during the first two months of the quarter as per the latest information available from AMFI.

HDFC Mutual Fund retains top AUM position
HDFC Mutual Fund retained its top position by AUM across fund houses in the September quarter with respect to total assets managed. However, the fund's average AUM was down by Rs19 billion or 1.8 per cent to Rs 1.03 trillion.

Reliance Mutual Fund maintained the second position at Rs 932 bn, down by 4.6 per cent or Rs45 billion.
ICICI Prudential Mutual Fund was ranked third in the asset tally at Rs 852 billion; its average assets were down by Rs65 billion or 7.1 per cent. The share of the top five mutual funds' assets was 53 per cent in the September quarter (same as the previous quarter) while the share of top 10 funds' assets was 79 per cent (78 per cent in the previous quarter). The bottom 10 fund houses continued to occupy less than 1 per cent of the average AUM.

Out of the 44 fund houses, 34 posted a fall in AUM in the quarter. ICICI Prudential Mutual Fund registered the highest fall in assets in absolute terms, down by Rs65 billion to Rs852 billion, followed by UTI Mutual Fund, whose assets fell by Rs46 billion to Rs701 billion in the quarter.

Ten AMCs witnessed a rise in their average AUM led by Franklin Templeton Mutual Fund (in absolute terms), whose average assets rose by Rs20 billion to Rs437 billion.