The Hindu Business Line : Mutual funds see sharp shrinkage in asset base

Mumbai, Nov.3 October has really been a bad month for Indian mutual funds with their assets under management (AUM) seeing the sharpest fall in recent times.

All the 30 fund houses (of the total 37) which reported their monthly AUMs on Monday have posted a drop in their asset base.

Reliance MF, the country’s largest fund house in terms of asset base, has reported more than 17-per cent fall in its AUM, losing Rs 15,400 crore in value in October, while HDFC, the second largest, saw a 12-per cent drop in its assets.

Other top mutual funds such as ICICI Prudential, UTI and Birla Sun Life have yet to release their figures.

According to analysts, these fund houses are also in the same league.

In the case of most fund houses, the fall in AUM ranges from 15 to 25 per cent. However, some have reported a more than 30 per cent drop.

There was huge redemption in liquid schemes and fixed maturity plans (FMPs) in October and the fall in the asset base reflected that, said the Chief Executive Officer of a mutual fund house.

The fall in AUM is partly due to value erosion in equities and partly due to the redemptions, said Mr Waqar Naqvi, CEO of Taurus Mutual Fund.

The redemptions started with the advance tax payments in September, with mainly banks and corporates withdrawing money to meet their liquidity needs, said Mr Ramkumar K, Head-Fixed Income, Sundaram BNP Paribas Asset Management Company.

The redemption pressure was largely being felt in fixed income schemes, liquid schemes and to a small extent in FMPs, said Mr Naqvi.

Hit by severe liquidity crunch, mutual funds were net sellers of debt worth Rs 26,081 crore in October, while in September they were net buyers of debt of close to Rs 6,416 crore, according to SEBI data.

While equity-diversified schemes have registered, on average, 24-per cent fall in returns, the debt schemes have given a return of less than one per cent in October.

The liquidity was very tight in October with call money rates hitting a high of 21 per cent, Mr Naqvi said. Realising the fund crunch being faced by MFs, the Reserve Bank of India has provided liquidity support to MFs through banks.

The Indian Banks Association on Saturday opened a special counter to assist mutual funds facing redemption pressure.