The Hindu Business Line : MFs’ asset base grows at slower pace in June

Mumbai, July 2 The asset base of the mutual fund industry grew 4.9 per cent in June, recording the lowest monthly growth during the quarter, partly due to banks and corporations withdrawing money for advance tax payments.

The assets under management by the industry stood at Rs 6,70,993 crore as at June-end.

“Usually there is a tendency for banks to withdraw money during the quarter-end to fulfil compliance requirements in terms of balances to be maintained, advance tax payments etc,” said Mr Srinivas Jain, Chief Marketing Officer, SBI Mutual Fund.

Lot of banks and corporates withdraw money during the end of the first quarter for advance tax payments, so to that extent the growth was subdued, said a fund manager. This money will flow back into the system in July, said Mr Jain.

The industry had witnessed a steep growth of 15 per cent in May on the back of a substantial rise in equities as well as strong liquidity in the system.

Of the 38 fund houses, 26 recorded a rise in their asset base, while nine witnessed a decline in their AUMs. Apart from advance tax-related withdrawals, the equity markets were more or less flat or slightly negative during June so the asset base grew accordingly, said a fund manager.

Also the blip, which we saw in May as the equity markets rose steeply, was not there in June, so there was a huge drop in the growth rate in May, he added.

The benchmark Sensex was up by less than 1 per cent during the month.

While debt schemes witnessed outflows, there were favourable inflows in equity schemes of many fund houses, said fund managers. There were two equity schemes and four debt schemes launched this month, according to Value Research. Among them, Reliance’s infrastructure equity scheme garnered about Rs 2,350 crore. The Baroda Pioneer Treasury Advantage debt fund mopped up nearly Rs 500 crore.

The huge outflows from debt funds are a routine phenomenon during quarter ends as banks and corporate houses withdraw their investments during this period.

Earlier in the month, speaking at the fifth CII Mutual Fund Summit-2009 held in the city, the SEBI Chairman, Mr C.B. Bhave, had urged mutual funds to increase focus on retail investors. He had said that the “mutual fund industry should learn from the crisis of October that if you rely on corporate and build on those AUMs then it is a mistake”. More than 70 per cent of the asset base of the mutual fund industry lies in debt schemes, and about 25 per cent in equity schemes, the rest falling under hybrid schemes, according to Value Research data.