Mutual funds’ asset base drops 7% in Nov

The mutual fund industry’s assets under management (AUM) fell seven per cent in November. The fall was led by a substantial decline in the asset bases of mid-sized mutual fund houses.
While the top fund houses too recorded a fall in AUM, UTI Mutual Fund, the fourth largest fund house by asset base, reported a marginal increase in its asset base.
The industry shed Rs 29,831 crore worth of assets in the past month. Their AUM now stands at Rs 4,02,029 crore against Rs 4,31,860 crore in October.
Of the 35 mutual fund houses which have declared their assets under management data, only Tata Mutual Fund and UTI Mutual Fund reported increase in their asset base.
The asset base of Reliance Mutual Fund, the top fund house by asset size, dropped 4.2 per cent.
HDFC Mutual Fund, second largest fund house, recorded a dip of 2.67 per cent in its AUM.
ICICI Prudential’s asset base fell by 5.42 per cent, while UTI Mutual Fund’s AUM rose 0.19 per cent.
The benchmark Sensex had fallen by more than seven per cent in November, while the broader Nifty was down by 4.5 per cent. The depreciation in the mutual funds’ asset base was more in equity funds compared with debt schemes, said Mr Ramkumar K, Head-Fixed Income, Sundaram BNP Paribas Asset Management.
The fall in the asset base is partly due to the mark-to-market loss in November and partly due to redemptions, said a fund manager.
With interest rates softening, the debt funds are recording an appreciation in value, which adds to the asset base, said an analyst. But the proportion of interest rate sensitive funds (bond and gilt funds) to the AUM of the industry as a whole is not significant so their contribution through value appreciation will also not be big, said Mr Ramkumar.
Fund managers said that while there is not much redemption pressure, the inflows are also minimal.
Very few people are now investing directly in the stock market and are showing a preference for the SIP route, said Mr K. Venkitesh, National Head of Distribution, Geojit Financial Services.
While the overall mutual fund collections have drastically come down in the past few months, SIPs are still attracting considerable interest.
One-time lump sum investments have fallen drastically.

The AUM for equity category in October was Rs 1,09,658 crore, while for debt it was Rs 3,22,202 crore.

Source: http://www.thehindubusinessline.com/2008/12/03/stories/2008120352540100.htm