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Better equity market valuations and attractive yields on fixed income products led to higher domestic institutional and retail participation, resulting in a 3.7 per cent increase in the average AUM of fund houses for the mutual fund industry for the January-March quarter.
According to data on the Association of Mutual Funds in India Web site, the average assets under management of the mutual fund industry went up to Rs 7 lakh crore as on March 31, 2011. For the quarter ended December 2010, the AUM for the industry was Rs 6.75 lakh crore.
The two main reasons for better performance of the mutual fund industry has been the fall in the market and the increase in yields from the fixed income products. “DIIs have been net buyers this quarter. The markets also corrected, which provided good buying opportunity for the investors,” said Mr Gopal Agrawal, Deputy CIO and Head-Equity, Mirae Asset Global Investments (India).
Opportunity for buyers
In the last three months, the Sensex has given returns of -3.89 per cent. Therefore, fund managers expect heavy movements in the Sensex creating more opportunities for investors.
Fixed maturity products (FMPs) became more popular among the investors during the quarter under discussion due to the increase in interest rates. These products have given returns better than the Sensex and the bank fixed deposits (for the three-month period).
Traditionally, ELSS products do well during end of every quarter, particularly in January-March. However, this has not been the case this year. “Less were not so successful this year because of rumours that these products would cease to exist once the Direct Taxes Code is implemented. Also, several mid-cap and small-cap ELSS funds had not performed well in the earlier quarters making them unpopular among the investors,” said Mr Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.
There were no redemption pressures during the quarter. Fund managers also said that there was little to worry about as there have been more investments in mid-cap equities, fixed maturity products and Gold ETFs.
Mid-cap is yet to see a rally and is therefore attractive, say analysts. Redemptions were seen in case of institutions, which were redeeming units for advance tax payment, a common practice at the end of each quarter, they added.
The industry has 40 functional fund houses.
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