Indian mutual funds log 1.5% decline in asset base in June

Huge outflows worth over Rs25,000 crore from the liquid funds led the Indian mutual funds to log a near 1.5% decline in their asset base in June on a month-on-month basis.

However, there is nothing unusual about it as quarter-end outflows from liquid funds are a regular feature in the industry. Liquid fund, which receive investments from corporates, withdraw their short term investments to meet the payment of advance tax and dividends.

According to data released by the Association of Mutual Funds in India (AMFI), the fund industry shed around Rs24,000 crore during the month of June, which led to decline in the overall asset base to Rs6,88,825 crore. Most fund categories witnessed outflows during the month. Liquid funds saw a maximum outflow worth over Rs25,000 crore, followed by Gold ETFs (Rs227 crore), Equity (Rs186 crore), ELSS (Rs100 crore), and Fund of Funds (Rs44 crore).

Explaining the reason behind the maximum outflows seen in Liquid funds, Mahendra Jajoo, ED and CIO Fixed Income, Pramerica Mutual Fund, opined, "Major Corporates and banks withdraw their short-term investments to meet their advance tax and capital adequacy requirements respectively. There is nothing to worry as it's a typical quarter end outflows. Hence, this outflow is in line with expectations."

"This quarter (April-June) AUM has shown a positive growth in comparison to the preceding quarter," he added.

The equity market represented by the benchmark S&P CNX Nifty has increased by over 7% in the month of June. With Prime Minister Manmohan Singh once again heading the finance ministry, equity market is expecting that fresh economic reforms would be propelled from his side. However, equity and ELSS schemes has witnessed redemption pressure in the month of June.Capturing the paradox of equity markets, Nelson D'souza, General Manager, Fundsupermart.com, said, "Lack of confidence is witnessed amongst the investors regarding equity funds, therefore, while the market was on uptrend, people redeemed in order to book profit or to cut down their losses."

Talking about the redemption seen in Gold ETFs, D'souza, said, "Globally gold prices are on downtrend which is urging investors to look for another safe heaven."

Focusing on the categories where fund inflows have been seen, it's the Income fund which leads the category. Income fund posted inflows worth Rs1,567 crore, followed by gilt funds (Rs115 crore), balanced funds (Rs19 crore).

It's the third month in a row where Income funds saw inflows. Endorsing this fact D'souza of Fundsupermart.com, averred, "Lot of HNIs and retail investors are opting this fund due to higher yields."

Net Investments in Mutual Funds

Inflows (Rs. in Crore)
Category	April	May	June
Income	17,874	1580	1567
Equity	-455	506<	-186
Balanced	-23	61	19
Liquid	75,752	25,052	-25,128
Gilt	-230	-371	115
ELSS	-160	-86	-100
Gold ETFs	50	-41	-227
Other ETFs	-51	32	15
Fund of Funds	-11	9	-44
Net Flow	92,746	26,742	-23,969
AUM	6,80,154	6,99,284	6,88,825
Growth in AUM (in per cent)		2.8%	-1.5%

Source: AMFI