Figures released by the Association of Mutual Funds of India (AMFI) show that out of Rs 6,429 crore mobilised by the industry in May 2000, Rs 5,511 crore or 85.7 per cent of sales went out as redemptions during the month.Institution-sponsored funds were the worst affected and paid out Rs 216 crore in May 2000 on account of redemptions/repurchases against sales of Rs 95 crore only. Even bank-sponsored funds paid out Rs 161 crore against sales of Rs 95 crore.

UTI, the industry leader, was also not spared and it had to pay nearly 90 per cent of its Rs 1,224 crore mobilisation towards redemptions/repurchases. Private sector mutual funds, as a whole, paid over 80 per cent of its sales on redemptions. Debt-oriented schemes suffered maximum redemptions in May, accounting for 85.86 per cent of total redemptions of Rs 5,511 crore during the month. An industry insider said: "April was the watershed month with the markets witnessing maximum volatility and redemption pressures which accentuated the stock market crisis. All said and done, the Nasdaq linkage is still very strong."

Returns on debt schemes dropped drastically, according to industry sources, in May to an annualised 5 per cent. Returns suffered as a strong dollar pushed short term debt yields up, leading to sharp withdrawals from income schemes, the sources explained.

A private sector mutual fund source admitted that there is lot of hot money circulating in the industry and his fund witnessed major redemptions in April as "most IPO-oriented investors were booking profits". He added that his fund, fortunately, did not face similar pressures in May because both its sectoral fund and debt fund were in positive territory and the growth fund saw neutral flows during the month with inflows matching outflows.

Overall pressure on cash flows got reflected in the investment pattern of the industry during the first two weeks of June 2000. During the fortnight, mutual funds continued to be net sellers. Equity sales from June 1 to June 13 amounted to Rs 1,058 crore while purchases during the period added up to Rs 582 crore, resulting in net sales of Rs 476 crore. On sales side, the industry mobilised Rs 6,429 crore in May 2000 out of which existing schemes accounted for Rs 6,195 crore. Private sector mutual funds contributed 78 per cent to total collections while UTI's share was 19 per cent.