The Hindu Business Line : MFs' exposure in equities doubles to Rs 70,846 cr

The assets under management (AUM) in equities by mutual funds rose by 119.24 per cent to Rs 70,846 crore in November from Rs 32,314 crore in November.

In percentage terms, AUM in equities was 21.5 per cent in November 2004, which grew to touch 34.5 per cent in November 2005, according to data compiled by Association of Mutual Funds in India (AMFI).

"There has been a perceptible change. The shift from debt to equity is mainly due to the declining yield from the debt from about 12-13 per cent to 5-6 per cent now," says Mr A.P. Kurien, Chairman, AMFI.

He anticipates the trend to continue as more equity-oriented schemes hit the markets. "Why should people invest in debt when the returns are not attractive," asks Mr Kurien.

Adds Mr S.V. Prasad, CEO of Birla Sun Life Asset Management Company Ltd: "Our equity assets have grown significantly as a proportion of the overall asset mix. The proportion of equity assets has gone up from 17.5 per cent in March 2004 to 27.75 per cent in October 2005.

"We expect the trend to continue in the growing equity asset mix due to greater retail participation, the low interest rates also being a factor contributing towards the trend," he says.

Another reason for the increase in AUM in equities is due to the sharp rise in the mutual funds' portfolio during the last 12 months, say analysts.

According to data compiled by the Securities and Exchange Board of India (SEBI), the net purchase of shares by mutual funds touched Rs 11,874 crore in the April 1-December 13, 2005 period, a rise of 2,550 per cent from Rs 448 crore (net purchase of shares) in the full fiscal from April 1, 2004 to March 30, 2005.

However, in overall terms, mutual funds continue to invest a large amount in the debt markets. Though the growth may not be as exciting as the equities market, the net purchase of debt by mutual funds in the domestic market stood at Rs 34,632.78 crore during the April 1-December 13, 2005. Compared to this, during the last fiscal the net purchase by mutual funds was lower at Rs 16,987.29 crore, says the SEBI data.