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Mutual funds’ AAUM falls 4.35% in Q3

The Indian mutual fund industry saw fall of over 4.35% in its average assets under management (AAUM) for the October-December quarter following a lack of participation from retail investors.

According to data from the Association of Mutual Funds in India (AMFI), the total AAUM of 44 fund houses at the end of the October-December quarter stood at R6,817,07.83 crore, a fall of R31,033.89 crore against R7,127,41.73 crore for the July-September quarter.

HDFC Mutual Fund continued to retain its number one slot with an AAUM of over R88,628.02 crore. However, its AAUM for the December quarter was down by 3.48% against that in the previous quarter.

According to Crisil, as many as 24 out of 44 fund houses logged a fall in the average AAUM in the December quarter with Reliance Mutual Fund registering the highest fall in average AAUM in absolute terms by around R8,354.79 crore or 9.22% toR82,305.80 crore in the December quarter.

SBI Mutual Fund saw its average AUM falling by nearly R6,179.88 crore or 12.95% to R41,551.51 crore in the latest quarter. In percentage terms, Union KBC Mutual Fund saw the highest fall at around 37.87% to end with assets of R54,015 crore.

Among gainers, JP Morgan Mutual Fund registered the highest growth in average AUM, with its AUM rising R2,011.02 crore or 42.36% in the quarter to R 6,758.71 crore.

Deepak Chatterjee MD and CEO of SBI MF says, “Overall, the trend in the assets is declining, which is very dissatisfying and distressing. Also there is no fresh money flowing into the equity schemes , following weak equity markets. We are witnessing some growth on fixed income side, where retail investors are coming in fixed maturity plans (FMPs), but in the last few months they have remained out of equity funds.”

Crisil in its reports also states that mutual funds AAUM was down by 4.4% in Q42011 on withdrawals by corporates, banks and weak equities. The fall can be attributed to redemption by corporates and banks besides the ongoing slide in the equity market.

“Corporate withdrawals were on account of quarter-end advance tax payments, which were reported at around R30,000-40,000 crore for the December quarter, much lower than R68,000 crore in the September quarter. As per inflow-outflow trends seen in the past, corporates typically reverse these outflows in the month following the quarter end,” says Crisil report.

The report further adds “Banks withdrew due to two reasons; on account of balance sheet capital adequacy requirements for the quarter end and secondly due to Reserve Bank of India (RBI) circular to reduce banks’ exposure to short maturity mutual funds to 10% of their net worth by end-January 2012.

Banks’ investment in mutual funds fell to R49,300 crore as on December 16, 2011 as compared to R65,800 crore as on September 23, 2011.”

Source: http://www.financialexpress.com/news/mutual-funds-aaum-falls-4.35-in-q3/895878/0

Foreign investor participation likely to be limited: Experts

After allowing qualified foreign investors (QFIs) to invest in equities indirectly through the mutual fund (MF) route in August, the government on Sunday paved the way for QFIs to invest in Indian equities directly as well. Individual QFIs will soon be allowed to invest up to 5% of the paid-up capital in any company and up to 10% of the paid-up capital on aggregate basis (all foreign individuals put together). These limits are over and above the cap earmarked for foreign institutional investors (FIIs) and NRIs who can directly invest in the Indian equity market.

The government hopes that the move will help in widening the class of investors and reduce market volatility. It also hopes to attract more foreign funds. Amid slowing economic growth, FIIs pulled out as much as around Rs 2,800 crore in 2011 from the Indian stock markets.

Will QFIs invest?
Experts are of the view that the step is in the right direction but it would only have a meaningful impact in the long run. "A big chunk of investment in the stock market is driven by perception," said Aseem Dhru, MD and CEO, HDFC Securities Ltd. "Due to a slowing economy and lack of policy initiative, the perception about India is not very bullish overseas. Hence, not much investment will be made in the short run. But as Indian growth story is likely to attract investors in the long run, the move may counter the volatile behaviour of FIIs."

"Investment by foreign nationals would depend upon the way Indian growth pans out," said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.

The limited impact the move may have in the near term can also be gauged from the fact that none of the MF firms have taken any initiative to expand their reach outside India despite government allowing QFIs to invest in equity schemes of MF houses last year. And probably this is the reason why the capital market has not reacted much to the news.

The other factor that could deter foreign investor from investing in India is exchange rate fluctuation. "While, it is relatively easier to evaluate a particular company, predicting currency movement would not be easy," said Vinay Agarwal, executive director, equities brokerages, Angel Broking Ltd.

Source: http://www.hindustantimes.com/business-news/Features/Foreign-investor-participation-likely-to-be-limited-Experts/Article1-792461.aspx