MF industry assets hit record high of Rs 7.62 lakh cr

Assets of the mutual fund (MF) industry touched an all time high of Rs 7.62 lakh crore, while the country’s largest fund house, Reliance MF, saw a decline of over Rs 1,400 crore in its average assets under management (AUM) at the end of October.

The industry’s average AUM grew by Rs 19,391 crore, or 2.61 per cent, in October, which analysts believe was mainly on the back of increased inflows in fixed income plans.
The combined average AUM of the 36 fund houses hit the historic Rs 762,301.82-crore mark at the end of October, data by the Association of Mutual Funds in India (AMFI) showed.
“Fund houses have witnessed a decline in assets of their equity portfolio. But inflows into fixed income schemes helped the industry to record a growth in assets,” Taurus MF Managing Director R K Gupta said.
Reliance MF maintained its position as the country’s largest fund house despite a decline of Rs 1,469.51 crore in its AUM during the month. At the end of October, the AUM of Reliance MF stood at Rs 116,781.92 crore.
“Reliance MF has increased equity exposure than other portfolios. Since all investments in equities need to be mark-to-market at the end of the month, the AUM of the fund house suffered a decline during October,” Gupta noted.
The assets of the country’s second-largest fund house, HDFC MF, inched closer to the Rs 1 lakh crore-mark with addition of Rs 2,888 crore during October. At the end of October, the AUM of HDFC MF stood at Rs 93,316.03 crore.
ICICI Prudential MF added Rs 405.36 crore to its assets, while the fifth-largest fund house, UTI MF, witnessed the biggest jump of Rs 3,258.55 crore in its AUM during October.
Fund houses that saw their average AUM rising in October includes Canara Robeco MF, Sahara MF and SBI MF.
Of the 36 fund houses, as many as 10 reported a decline in assets. Marketmen feel that with a sharp decline of 7 per cent in the Indian equities during October, there has been a decline in AUMs of many fund houses.
In October, the Bombay Stock Exchange Sensex fell 7.2 per cent to below 16,000 as volatility increased across global markets.
While the AUM of Religare MF fell by Rs 357 crore to Rs 13,497 crore during the month, the assets of ING MF declined by Rs 156.08 crore to Rs 1,804.20 crore.
Other fund houses that saw a decline in their assets includedDeutsche MF, Principal MF, HSBC MF and Fidelity MF.
However, Gupta cautioned that there could be a slight decline in the assets of fund houses during this month as “it is likely that RBI might impose restrictions on banks’ investments in MFs in coming days.”

Source: http://www.business-standard.com/india/news/mf-industry-assets-hit-record-highrs-762-lakh-cr/375321/

Demand for debt will sustain amid rate rise - fund mgr

Investor appetite for debt will sustain for the rest of the fiscal year on waning supplies even as the market readies itself for a series of aggressive poilicy rate increases, a senior debt fund manager said on Wednesday.
Federal supply will drop as the government will sell less than half the amount it sold in the first half and its appeal as a savings instrument will stay as the nation lacks social security, said Maneesh Dangi of Birla Sunlife Mutual Fund.
"After a long time we are seeing the demand-supply situation is favouring bonds including state loans. This November-December we should have a bit of rally in bonds," said Dangi, who has 420 billion rupees of assets under management.
"In a country like ours where the social security is not in place demand for debt would always be larger than equity. Equity is s very small component of Indian savings about 6-7 percent 94 percent is still fixed income," he added.
The benchmark 10-year bond yield which had slipped to a record 4.86 percent after a hefty rate cut by the Reserve Bank as part of its stimulus package.
The 10-year yield has risen more than 200 basis points so far in 2009 mainly due to excessive debt supplies in the market.
The 10-year benchmark was trading at a yield of 7.27 percent at 4.50 p.m. and Dangi expects the yield to drop to 7 percent in a couple of weeks. He sees it trading in a 6.90-7.50 percent range for the next three months.
The Reserve Bank of India last week laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector, lifting its inflation forecast and warning of a threat from asset price bubbles.
While policy rates are expected to rise in coming months, the prices suggest an aggressive hiking cycle, he said.

EXTENT OF HIKES
"I agree with the market that there would be rate hikes. The rate-easing cycle has ended and asset prices will in general reflate now, but I don't agree with the market on the extent it would be," he said.
He said traders expect the central bank to raise its policy rates by more than 100 basis points within the next three months.
In January, we would see a 50-basis-point increase in the repo and reverse repo rates and the cash reserve ratio (CRR), he said.
This expectation of sharp increases means bond yields may not rise as much when policy rates are actually increased, he added.
"Now the rate hike cycle... you know it's going to be there but the anxiety of the market is so much that it wants a premium to move from the easy to tight cycle which is why they are trading at such levels... but when rate hikes begin they will start to normalising," Dangi said.
Dangi said he expected the central bank to put in place liquidity control measures which would help counter the effect of the incremental foreign fund inflows without penalising markets.
"We are relatively looking up right now which has a lot to do with the fiscal stimulus and the base effect," he said.
He said that demand for fixed maturity plans would improve in the run up to March after rate tightening starts.
"We can't indicate rates anymore now but yes, the delivery of return would improve in the run up to March because as we get into the rate hiking cycle, the premium is likely to increase in the shorter end."

Source: http://in.reuters.com/article/businessNews/idINIndia-43677720091104?sp=true