March redemptions halt bullish AUM numbers’ rally

Mutual fund AUM rose to Rs5 trillion in February from Rs4 trillion in November

Indian mutual funds may have seen an outflow of as much as Rs50,000 crore from their assets under management (AUM) in March under heavy redemption pressure from banks before the end of the fiscal, according to people in the asset management business.
Mutual fund AUM rose to Rs5 trillion in February from Rs4 trillion in November. According to data available with the Association of Mutual Funds of India (Amfi), investments in liquid or money market schemes contributed Rs42,000 crore in January and February alone, accounting for at least 42% of the increase.The run-up in AUM may have been short-lived, according to people in the mutual fund industry who didn’t want to be named.Of the Rs42,000 crore parked in liquid schemes in January and February, at least 95% was invested for the short term by banks, which redeemed money from such funds before Tuesday’s end of fiscal 2009 in order to maintain adequate capital on their balance sheets, these people said.Fixed-income heads across the mutual fund industry and distributors told CNBC-TV18 that as much as Rs50,000 crore had been redeemed.People at one of the country’s large mutual fund houses said banks had redeemed Rs6,000 crore of the Rs8,000 crore they had parked in its liquid funds. More redemptions are not being ruled out, they said.SBI Mutual Fund, too, has witnessed the redemption of Rs3,000-3,500 crore by banks from its liquid schemes, people said.People at UTI Mutual Fund said banks likely pulled out money to the tune of Rs3,500 crore from its liquid schemes. Companies, too, may have withdrawn Rs5,000-6,000 crore in March.“This is a seasonal tendency and is chiefly for tax purposes. The money is kept for short term and will eventually come back into the schemes,” said A.P. Kurian, chairman of Amfi.