MF Assets Shrink In May But Equity Uptrend Continues

Mutual Funds

Indian mutual funds’ assets under management (AUM) retreated from a record high of Rs 14.22 trillion in April to Rs 13.82 trillion in May, marking a decline of 2.8%, or Rs 403 billion, according to data from the Association of Mutual Funds in India (AMFI). The fall was primarily due to outflows in liquid and gilt funds. However, assets of equity, balanced and debt funds increased.

Liquid funds lose a fifth of the pie

Liquid fund assets fell 20%, or Rs 673.03 billion, to Rs 2.70 trillion, following the largest outflow in nine months. The category saw a trend reversal, with an outflow of Rs 693.99 billion versus an inflow of Rs 1.34 trillion in April.

Gilt funds weighed down by outflow

Gilt funds witnessed their fourth consecutive month of outflows, indicating fading investor interest. The category has posted a cumulative outflow of Rs 28.31 billion so far in 2016, despite a rate cut of 25 basis points in April amid a view that the Reserve Bank of India (RBI) may not go for aggressive cuts. The category’s assets fell 4.8%, or Rs 7.71 billion, to Rs 153.52 billion.

Swell season continues for equity funds

Investors continued to favour equity funds, pumping in Rs 47.21 billion compared with Rs 44.38 billion in April. This is further confirmation that the outflow of Rs 13.70 billion seen in March was but a blip for a category that has posted monthly inflows since May 2014. The category’s AUM rose 3.8%, or Rs 153.12 billion, to Rs 4.15 trillion, riding on the inflows and mark-to-market (MTM) gains. The equity market, represented by the Nifty 50 index, rose nearly 4% in May, as sentiment improved on hopes that a good monsoon will boost the economy.

Balanced funds shine

Given their exposure to equity, balanced funds also logged inflows, continuing a trend seen over the past two years. AUM rose to a record high of Rs 426.95 billion, up 4.7%, or Rs 19.31 billion, led by MTM gains and inflows. The category, as represented by the CRISIL Balanced Fund – Aggressive Index, rose 2.8% in May.

Fillip for debt funds, too

Debt funds’ assets peaked to a new high of Rs 6.11 trillion, up 1.6%, or Rs 95.21 billion, thanks to MTM gains and inflows. The category attracted inflows of Rs 56.88 billion in May, after Rs 314.48 billion in April.

Sheen off gold ETFs

Gold ETFs, which have seen persistent outflows over the past three years, saw a further Rs 0.79 billion exit in May. The category’s AUM fell 5% to Rs 61.59 billion due to the outflows and MTM losses. The underlying asset class, represented by the CRISIL Gold Index, fell 3.3% in May.