Strong inflows into liquid funds shore up MFs' asset base in May

Strong inflows into liquid funds helped Indian mutual funds log a near-3% rise in their asset base in May.

The fund industry added over Rs 26,742 crore during the month, taking the overall asset base to Rs 6,99,284 crore, according to data released by the Association of Mutual Funds in India.

Most fund categories witnessed inflows during the month. Equity funds posted inflows worth Rs 506 crore in May. Liquid funds netted over Rs 25,000 crore, making them the largest contributors to the industry asset base.

Income fund assets swelled by over Rs 1,580 crore while gilt funds posted outflows worth Rs 371 crore. Redemptions outpaced investments in ELSS funds, which lost over Rs 86 crore last month.

Gold exchange traded funds logged outflows of Rs 41 crore while balanced funds saw positive inflows worth 61crore.

"Redemptions from equity funds were lower in May. On the flip side, money trickled in through systematic plans. Liquid funds received investments from corporates, which helped the industry record positive numbers last month," said Vijai Mantri, CEO of Pramerica Asset Management.

Income funds, which include short-term debt funds and fixed maturity plans, saw inflows for the second month in a row.

The rising interest rates in the economy over the past two years have seen the share of FMPs in the category grow to 43% in May from 8% in May 2010, a recent Crisil report said. Inflows into this category can be attributed to several fixed maturity plans launched during the month.

"Money has to come into equity funds for asset managers to make money," said the chief executive of a leading fund house. "These are bad times... The number of live SIP folios has come down significantly over the past four months. The industry needs more investors to stay afloat," the official said.

Markets, too, have not been very conducive for new investors; the 30-share Sensex corrected over -6.26% in May.

Returns of most equity funds have also not offered any cheer. Large cap, diversified equity and small & mid-cap funds yielded an average -5.5%, -5.6% and -4.9% returns, respectively, during May, going by the data sourced from Crisil.

Source: http://articles.economictimes.indiatimes.com/2012-06-09/news/32140764_1_liquid-funds-equity-funds-short-term-debt-funds