MF AUM rise 18% in Apr on inflows into liquid funds: CRISIL

The mutual fund industry’s month-end assets under management (AUM) rose by 18% or Rs 1.24 trillion to Rs 8.26 trillion in April 2013 from Rs 7.01 trillion in March as per the monthly numbers released by the Association of Mutual Funds in India (AMFI). The month-on-month percentage gain in assets was the highest in the past two years and was led by inflows into money market and income funds. 

Liquid funds recorded highest inflows in the past two years

Liquid funds saw inflows of Rs 857 bn in April (the highest in two years), accounting for 80% of the total inflows in the month compared with record high outflows of Rs 1 trillion in March. The historical trend shows that quarter-end outflows in the category are reversed in the subsequent month as banks and corporates re-invest their surplus funds that were withdrawn to pay quarter-end financial and advance tax requirements respectively. Led by surge in inflows and mark to market gains, the AUM of liquid funds increased 97% or Rs 908 bn to Rs 1.84 trillion in April from Rs 934 bn in March.

Check out the performance of Liquid Funds

Income funds’ assets rise to 35-month high

Income funds’ (includes long-term debt funds, short-term debt funds, fixed maturity plans and ultra short-term debt funds) assets rose by Rs 263 bn or 7% to a 35-month high of Rs 4.22 trillion, led by inflows of around Rs 202 bn and mark to market gains. Most of the inflows in the category have logged into short term and ultra short term debt funds as banks and corporates re-invested their funds in these short maturity categories. Long-term debt funds too have seen increase in interest led by hopes of interest rate decline in the country.

Gilt funds’ assets rise due to inflows

After declining 2% in March due to outflows of Rs 1.67 bn, gilt funds’ assets posted a rise of around 14% or Rs 11 bn to Rs 92 bn in April. The rise in assets was primarily due to inflows of around Rs 10 bn in the month amid anticipation of easing of interest rates.

Long-term debt and gilt funds benefit in an interest rate declining scenario as long-term bond prices (net asset values or NAVs) and interest rates (yields) move in opposite directions. A fall in interest rates will result in a rise in bond prices and positively impact long-term debt and gilt fund NAVs (returns). In line with market expectations, the Reserve Bank of India (RBI) cut its key repo rate by 25 bps in its latest monetary policy review held on May 3. This was the central bank’s third rate cut (each time by 25 bps) in the current calendar year as it pulls up its ante to spur slowing growth in the country.

Equity funds’ assets report gains despite outflows

Despite witnessing outflows of nearly Rs 3 bn, equity funds’ assets rose by 3.6% (highest rise in the past seven months) or Rs 61 bn to Rs 1.79 trillion in April on the back of market to market gains. The underlying market represented by the CNX Nifty Index rose over 4% during the month on hopes that the RBI would ease monetary policy to counter slowing domestic economic growth.

Gold ETFs see record fall in assets

Gold exchange traded funds (ETFs) posted a record fall of around 9% or Rs 10 bn in assets to Rs 106 bn in the month led by market to market losses as well as outflows from the category. Gold price represented by the CRISIL Gold Index fell 8% in the latest month led by weak global trend. The category also reported outflows of Rs 360 mn in April, the third consecutive month of outflows after Rs 870 mn and Rs 80 mn of outflows in March and February, respectively, due to a fall in demand for the commodity.