Advance tax payments coupled with high dividend payouts led to the mutual fund industry losing 16 per cent of its average assets under management (AUM) in March 2011.

End-March, the AUM dropped to Rs 5.9 lakh crore, the lowest in 22 months. The fall in AUM from February 2011 to March 2011 was Rs 1.15 lakh crore.

March 2011 saw net outflows of Rs 1.2 lakh crore, of which the liquid and income schemes accounted for the most outgo at Rs 98,255 crore and Rs 30,612 crore respectively.

At the end of every quarter, the industry sees large withdrawal of money, particularly from income and liquid funds.

“It is a phenomenon that happens every year when the money goes out of the industry in the form of advance taxes paid and then comes back again next quarter,” said Mr Hemant Rastogi, CEO, Wiseinvest Advisors. Equity schemes experienced net outflows of Rs 124 crore in March 2011.

The outflow was mainly on account of dividends paid on various schemes. As many as 45 funds paid dividends in March. Analysts say this can have a significant impact on the AUM of fund houses.

However, the Sensex and Nifty have performed well during this period increasing by 5 per cent each.

“This is just profit-booking by investors. All the people who had invested when the markets went from 20,000 to 18,000 are now exiting as they feel that the valuations are going up,” said Mr. Akshay Gupta, CEO, Peerless Mutual Fund.

But despite this drop in AUM, analysts and fund house officials are confident that the inflows will come back into the industry.

“Some liquid funds have already started seeing inflows. Equity funds will see inflows once the correction in the market happens,” added Mr Gupta.

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