There is a dip in the assets under management (AUM) of the mutual funds in the wake of the market meltdown in the domestic equity market has not deterred the fund houses from investing in equities since the beginning of the current calendar year. The MF industry has made a net investment at lower levels of the equities to earn higher profits in the long run when the market goes up.
According to Sebi, the mutual fund (MF) industry has made a net investment of Rs 8,590 crore in equities between January 1, 2008 to September 30, 2008. Giving reasons for the MFs pumping money in a bearish domestic equity market, Debashish Mohanty, country head, retail channel, UTI Mutual Fund, said that the fund houses are investing money at the lower level of the equities market as they can book profits during the market rally in the long run. A good mobilisation through new fund offerings (NFOs), specially in the first three months of the calendar year, has also been deployed in the market. ?Of course, tax saving schemes between January to March and followed by the Systematic Investment Plans (SIPs) and inflows in the existing equity and balanced funds have also helped the MF industry invest money in the market,? he said. According to market sources, the MF industry has mobilised around Rs 5,000 crore between January to September this year. The domestic market meltdown has impacted AUM. It dipped by 4%, or Rs 21,802 crore, during the corresponding period. The AUM has come down from Rs 55.09 lakh crore in December, 2007 to Rs 52.91 lakh crore in September 2008. The financial tsunami in the US has negatively affected the global market including Indian equity market. The Bombay Stock Exchange (BSE) Sensex dipped by 37% or 7,426 points. Likewise, the NSE Nifty has dipped by 36% or 2,217 points during the said period.
The research reports of both global and domestic agencies said that the sub-prime factor leading to the financial crisis in USA is responsible for the market meltdown.