In FY19, mutual fund industry witnessed total redemption worth Rs 242 lakh crore as against Rs 207 lakh crore in FY18.
During 2018-19, the 44-player mutual fund industry witnessed net inflows of Rs 1,09,701 crore compared to a net inflow of Rs 2,71,797 crore in 2017-18, a fall of 60 percent year-on-year, according to the Economic Survey.
Lower net inflows were largely on the back of rise in the redemptions in the last financial year. In FY19, mutual fund industry witnessed total redemption worth Rs 242 lakh crore as against Rs 207 lakh crore in FY18, data from Economic Survey revealed.
Among all categories, debt funds faced large redemptions in the aftermath of NBFC crisis which started in September particularly after ratings downgrades and default of IL&FS Group. The crisis spread to other companies--DHFL, Essel Group, Reliance Capital companies which was surfaced after they failed to make the payment on maturity.
The net asset values (NAVs) of debt schemes were hit as a slew of debt funds had exposure to these beleaguered companies which waned investor interest in these schemes.
On the other hand, inflows in equity funds offset the outflows from debt funds last year.
The first signs of this crisis emerged in June 2018 when Mumbai-based Infrastructure Leasing & Financial Services (IL&FS) defaulted on inter-corporate deposits and commercial paper (CP) worth around Rs 450 crore. Over the next two to three months, at least two rating agencies downgraded the company's long-term credit rating.
The crisis started by the unlisted infrastructure lending giant aggravated on September 17 after it defaulted on the interest payment of CPs. The company's debt was downgraded in the following few weeks for multiple defaults.
IL&FS Financial Services defaulted on seven of its debt obligations in September, according to a statement to the exchanges. In all, the IL&FS group owed over Rs 91,000 crore.
Another NBFC, such as Dewan Housing Finance (DHFL) was also downgraded in the last year.
Amidst all this, another firm there were talks of Essel Group companies facing a cash crunch.
The Department of Economic Affairs of the Finance Ministry presents the Economic Survey in Parliament every year a day before the Union Budget.The Survey, the maiden one authored by Chief Economic Adviser Krishnamurthy V Subramanian, showed that the cumulative net assets under management of all MFs increased by 11.4 percent to Rs 23.79 lakh crore in March 2019 from Rs 21.36 lakh crore in March 2018.