Mutual Funds witness sharpest monthly fall

Mumbai, Nov 15: Mutual funds in India recorded their sharpest monthly fall in assets in a year in October, dragged by the Stock market meltdown and heavy redemptions.

According to a report from HDFC Securities, this was the second consecutive monthly fall for mutual funds. The October drop seemed muted considering the heavy fall in the equity markets and redemptions in money market or liquid mutual funds, where banks and companies park their surplus money. The combined average assets under management (AUM) of the 35 fund houses in the country saw an erosion of over Rs 97,000 crore and dropped to Rs 4,31,901.42 crore at the end of October.

Reliance Mutual Fund continues to be the top fund house in the country with HDFC MF and ICICI Prudential following it.

The analysis of Equity Moves by Mutual Funds in October 2008 by HDFC Securities was based on Mutual Funds having month-end equity corpuses of more than Rs 3,000 crore (except Fidelity Mutual Fund whose portfolio for October 2008 was not available). The source of data for this analysis is NAV INDIA, who in turn takes into account the monthly-declared portfolios of the respective schemes wherever available (excluding offshore funds, FMPs and new fund offers).

In lieu of the declining AUMs of the fund houses, last month the Reserve Bank of India had decided to inject Rs 20,000 crore through short-term lending route to help the mutual funds meet their liquidity needs and overcome redemption pressure.

At the end of October, investors redeemed funds worth Rs 46,793 crore, with maximum of withdrawals coming in fixed income plans. The redemptions in mutual fund schemes have been on the rise in the current fiscal, and in September they had witnessed withdrawals to the tune of Rs 45,655 crore. Fixed income plans, with assured returns annually, saw a maximum pullout of Rs 52,820 crore as on October, followed by equity funds investing in stocks worth Rs 706 crore. Fixed maturity plans have witnessed panic redemption in October on concerns about the credit quality of debt papers held by these schemes.

Gilt funds, which invest in government securities, and Gold Exchange Traded Fund saw inflows of Rs 3,725 crore and Rs 140 crore, respectively. Gilt funds are mutual fund schemes floated by asset management companies with exclusive investments in government securities.

Within equity AUM, Reliance, UTI and HDFC saw the largest fall.

However in terms of percentage, ICICI Prudential saw the maximum fall. During October, Software stocks were in favour as defensive buys, while Banks-Private, Metals, Refineries, Electric Equipment and Contracting stocks got sold off. At micro level, buying was seen in HDFC Bank, Infosys, TCS and United Spirits among others.

UNI