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Continuity of rise in AUMs in doubt, says mutual fund industry

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Mutual funds posted their second consecutive month of rise by recording seven per cent growth in average AUMs (Reuters) Mutual funds posted their second consecutive month of rise by recording seven per cent growth in average AUMs (Reuters)
Summary'Rise in mutual fund AUMs is mainly due to flows into liquid funds.'

The mutual fund industry's average assets under management (AUMs) in November rose mainly on investments by banks and financial institutions in the liquid funds category, but the continuity of this trend is doubtful due to the volatile nature of such flows, industry officials said here today.

Industry experts also said that it is too early to cheer rising inflows into equity funds last month, though they are confident that redemption pressure is receding.

"The rise in AUMs is mainly due to flows into liquid funds, by banks and financial institutions among others. Also, equity schemes have witnessed renewed interest from investors with inflows and addition of new folios," Baroda Pioneer Mutual Fund managing director Jaideep Bhattacharya told PTI.

He said that redemption pressure seemed to be receding in the equity fund category.

"Investors who wanted to exit have already exited the market. It seems redemption pressure is receding," he said.

Mutual funds posted their second consecutive month of rise by recording seven per cent growth in average AUMs to an all-time high of Rs 8.90 lakh crore in November (as per Association of Mutual Funds of India (AMFI) figures for November), on the back of inflows into liquid funds.

Meanwhile, equity funds' AUMs also rose by one per cent, to Rs 1.75 lakh crore as per AMFI figures, making it the third monthly rise in a row.

Another official from a mid-size mutual fund house said that inflows into liquid funds is due to ample liquidity in the financial system.

"There is ample liquidity in the system. It has prompted banks and other financial institutions to park their money in liquid funds," LIC Nomura MF chief executive Nilesh Sathe said.

However, analysts also pointed out that it is not clear if this trend would continue as the nature of flows into liquid funds is very volatile.

"Usually, you will see that a lot of money going out of liquid funds during the end of a quarter due to advance tax payment and other issues. So, whether the inflow into liquid funds will continue in the coming months is yet to be seen before predicting any trend," Morningstar Investment Management's Senior Investment Consultant Dhruva Raj Chatterji said.

Flows into equity schemes is mainly due to new fund offers and he is yet to see a secular trend of inflows, he said.

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