The current high interest rate regime boosted investments in debt funds, helping the mutual fund industry record a 6 per cent growth in assets over the 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 in April-June 2011 stood at Rs 7.43 lakh crore, a jump of about Rs 42,546 crore from the quarter ended March 2011.

“High rate of interest has led to more inflows into the Fixed Maturity Plans (FMPs) and short-term debt funds. More and more FMPs are being launched where not only institutional but also retail participation is seen increasing. This is a good sign for the industry,” said Mr Srinivas Jain, Chief Marketing Officer, SBI Funds Management.

However, mutual fund analysts are quick to point out that the data constituted the average AUM for the quarter and that the closing numbers could be much less. This is mainly because corporations and banks generally book profits at the end of the quarter and invest again at the beginning of the next quarter, they said.

Total AUM at end-April 2011 stood at Rs 7.85 lakh crore and at end May 2011, Rs 7.31 lakh crore. The rise in AUMs in both these months was driven mainly by increase in investments in liquid funds.

On the equity side of the business, there has been a marginal increase, said fund houses officials. This was due to the slight revival of the stock markets in the beginning and towards the end of June, said fund analysts. “While retail participation in the equity mutual funds comes mainly from the larger metros, FMPs are gaining popularity among retail investors in smaller towns as a better option to bank fixed deposits,” said Mr Abhinav Angirish, Managing Director, Abchlor Investment Advisors.

Of the top five fund houses in the country, all – HDFC, ICICI Prudential, UTI and Birla Sun Life except Reliance Mutual Fund, saw their AUMs increase. Reliance mutual fund, while maintaining its position as the top fund management house in the country, saw a marginal drop of 0.31 per cent.

IDFC Mutual Fund replaced Tata Mutual Fund as the tenth largest fund house in the country. As on March 2011, Tata Mutual Fund's AUM was Rs 22, 681 crore; this increased to Rs 25,006 crore at the end of the June quarter. However, the AUM of IDFC Mutual Fund rose from Rs 21,018 crore to Rs 27, 848 crore during the same period, helping it to move from the 11th to the tenth position this quarter.

There were 42 operational mutual fund houses in the country as of June 2011. Of these, 30 saw their AUMs go up, with the highest rise in the case of Daiwa Asset Management (172 per cent) and the lowest in Sundaram Mutual (0.43 per cent).

Despite the good quarter, fund houses are still wary of the rest of the year. Historically, markets have always fared better in the latter half of the year. Possibility of lower than expected monsoons and high inflation could prove to be a dampener, but things will start looking up in the beginning of the third quarter, they added.

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