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The assets under management (AUM) of the mutual fund industry grew by 7 per cent in October, as inflows into debt funds increased. The AUM touched an 18-month high of Rs 7.68 lakh crore in October, up 6.68 per cent against Rs 7.2 lakh crore at the end of September.
However, there seems to be no respite for equity funds from redemptions, said fund house officials. Equity funds have seen a 2 per cent dip in their AUM and fallen by Rs 1.59 lakh crore. There are no incremental inflows and investors who stayed are now booking profits, they added.
Debt funds — both income and liquid/money-market funds — have recorded a 22.4 per cent rise in their AUM. These funds, especially liquid funds, had been continmually garnering flows due to rising interest rates and weak equity-market performance. Liquid and money-market funds are primarily short-term funds.
Interest in gilt funds
However, interest rates have been coming down over the last couple of quarters increasing interest in long-term bond funds such as gilt funds. “Investors are expecting an interest-rate cut in the coming months. Therefore, it is likely that there will be an increase in activity in long-term bond and gilt funds,” said Hiren M. Dhakan, Associate Fund Manager at Bonanza Portfolio.
Gilt funds are already getting more investments. In October, this category grew by Rs 1,037 crore. While this amount is about a little more than 2 per cent of the total inflows to the industry (Rs 48,135 crore) in October, it is a 31 per cent increase over the previous month’s inflows into these funds.
The AUM of exchange-traded funds (ETF) fell by more than 5 per cent to Rs 1,715 crore. Distributors said that investors seldom showed any interest unless there was a significant development in the markets. For instance, after the US presidential elections, investor queries poured in for gold ETFs, as gold prices were expected to move up. Gold prices have increased by Rs 690 to Rs 31,290 for 10 gm since the US presidential elections concluded.
AUM of gold ETFs stood at Rs 11, 477 crore, up 2.5 per cent over September.
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