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The joyride of mutual funds has come to a halt with the assets under management (AUM) of 44 fund houses falling 5 per cent in August. The drop was largely due to the sharp sell-off in the equity markets.
Despite heavy selling by foreign portfolio investors, retail investors seem to have kept their faith by investing ₹26,001 crore in equity schemes of mutual funds even while income funds witnessed a net outflow of ₹21,300 crore.
The industry AUM was down at ₹12.55 lakh crore from the record high of ₹13.17 lakh crore registered in July. The fresh fund flow into the mutual fund industry was down 22 per cent at ₹1.58 lakh crore last month compared to ₹2.05 lakh crore at July-end.
In July, the net inflow in equity schemes was at ₹20,784 crore while the outflow was at ₹8,604 crore in income funds. The benchmark Sensex was down 7 per cent to 26,283 points on August 31 from 28,187 recorded on August 3.
MFs invest ₹10,533 crThe strong fund flow in equity mutual fund schemes enabled fund managers to invest ₹10,533 crore in equities last month and pick up some of the stocks which were available at attractive valuations.
Rajiv Shastri, MD and CEO, Peerless Mutual Fund, said the dip in the industry AUM is a temporary phenomenon and was triggered to an extent by redemption in liquid schemes as some corporate houses faced cash crunch, besides a sharp fall in the equity markets.
For once, he said, retail investors have not followed foreign investors and dumped equity investments.
Fear of Fed rate hikeThe concern of foreign investors and domestic investors are different. With the US Fed close to raising interest rate, FPIs are pulling out money from various markets. They are also concerned about weak growth in China and the sharp fall in commodity prices, he said.
Domestic investors are showing faith in the government and the fall in commodity prices is seen as a major advantage. The RBI is preparing the ground for lower lending rates which should probably boost demand and kick-start the economic growth, he said.
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