The strong inflows into the mutual fund industry finally came to a halt in September, thanks to the IL&FS-inflicted crisis in the debt segment and mayhem in the equity markets.
Assets under management (AUM) of the mutual fund industry fell 13 per cent last month to ₹22.04 lakh crore, against ₹25.2 lakh crore logged in August, largely due to outflow from liquid and income funds, according to the Association of Mutual Funds in India.
Liquid and income funds witnessed an outflow of ₹2.11 lakh crore and ₹32,504 crore, respectively, due to the crisis kicked off by IL&FS defaulting on interest and redemption payments. In fact, the outflow from income funds was five times higher than in August. The benchmark Nifty 50 fell 6.4 per cent in September.
However, the retail inflow increased 40 per cent to ₹11,900 crore last month, against ₹8,500 crore logged in August, mainly due to rise in monthly systematic investment plan (SIP) payments.
Investment through SIPs was up marginally at ₹7,725 crore from ₹7,658 crore earlier, registering the 30th month of consecutive positive inflow. Equity and balanced funds witnessed inflows of ₹10,237 crore and ₹731 crore, respectively.
Tax commitments
NS Venkatesh, CEO, AMFI, said the AUM has come down due to outflow from liquid and income funds owing to the IL&FS issue and pull-out by large corporates to meet September quarter tax payment obligations.
Despite the equity markets being volatile and concern over IL&FS, retail investors reposed their faith in mutual funds and continued with their investments, he added.
Allaying concern of any major default by NBFCs and housing finance companies (HFCs), he said, there could be some pressure on small NBFCs with highly-leveraged lending books but most of them have enough liquidity to meet their commercial paper obligations as it is part of their working capital and banks are willing to lend them.
Venkatesh said the RBI has announced infusion of liquidity, and banks, led by State Bank of India, have assured lending to both NBFCs and HFCs. In fact, some HFCs have announced plans to buy back their commercial paper, he added.
The RBI will conduct open market operations in the second, third and fourth weeks of October for ₹36,000 crore to ease the liquidity pressure.