After receiving record investments over the past few years, mutual funds finally seem to be losing steam, with almost all top fund houses recording single digit growth or marginal fall in average assets under management (AUM) in the June quarter.
The average AUM of 43 mutual funds was up just 2 per cent to ₹23.4 lakh crore in the June quarter against ₹23.05 lakh crore logged in the March quarter, as most offshore funds trimmed their India exposure to focus on the reviving US economy.
The average AUM of ICICI Prudential Mutual Fund and Aditya Birla Mutual Fund in the June quarter were up just 1 per cent each at ₹3.1 lakh crore (₹3.05 lakh crore) and ₹2.49 lakh crore (₹2.47 lakh crore), respectively. HDFC Mutual Fund, which was ranked second in the list, saw its assets improve by just 2 per cent to ₹3.06 lakh crore (₹3 lakh crore).
The average AUM of Reliance Mutual Fund and UTI Mutual Fund in the quarter under review slipped 2 per cent and 1 per cent at ₹2.4 lakh crore (₹2.45 lakh crore) and ₹1.53 lakh crore (₹1.55 lakh crore), respectively. SBI Mutual Fund recorded 7 per cent increase at ₹2.33 lakh crore while Kotak Mahindra’s was up 2 per cent at ₹1.28 lakh crore (₹1.24 lakh crore).
Retail inflows remain strong
Interestingly smaller fund houses have seen strong growth. Mirae Asset Mutual Fund’s AUM was up 22 per cent at ₹19,178 crore (₹15,756 crore), IIFL Mutual Fund’s increased 59 per cent to ₹1,257 crore, while that of Essel MF and IL&FS MF’s were up 16 per cent each at ₹,1790 crore and ₹1,473 crore, respectively.
Sundeep Sikka, CEO, Reliance Nippon Mutual Fund, said the marginal fall in AUM is due to withdrawal of tactical investments made by institutional investors though retail inflows still remains strong.
In fact, he said Reliance Mutual Fund’s focus on retail investors has borne fruit with a monthly inflow of ₹77,000 crore, while it was ₹76,000 crore for HDFC MF and ₹57,000 crore for ICICI MF.
“The debt market has remained muted for the last two-three months, leading to outflow from debt funds. Pull-out by institutional investors may be part of their liquidity management strategy,” he said.
Fund of funds’ (a strategy in which a fund invests in other types of funds) investment in mutual funds was down 4 per cent to ₹4,22,244 crore (₹4,37,972 crore) in the June quarter, largely due to pull-out by overseas exchange-traded funds and overseas funds.
Overseas investors have withdrawn ₹61,000 crore from the capital markets in the June quarter. So far this year, they withdrew ₹44,737 crore from the capital markets, including ₹40,541 crore from the debt market and the remaining ₹4,196 crore from equities.
In a similar situation 10 years back, the market would have tanked, but now the steady retail inflow through mutual funds is absorbing the shock unleashed by foreign investors, said Sikka.