MFs’ July assets fall on tight liquidity

After a record outflow of nearly 16% in the average assets under management (AAUM) last month, the Indian mutual fund (MF) industry has recorded a marginal decline in its AAUM for the month ended July ’10.

After a record outflow of nearly 16% in the average assets under management (AAUM) last month, the Indian mutual fund (MF) industry has recorded a marginal decline in its AAUM for the month ended July ’10.

According to Amfi data, the cumulative AAUM at the end of July ’10 was Rs 6,65,567 crore, lower by about 1.5% compared with the year ago period. The current decline in the average assets of the MF industry has to be viewed against the backdrop of the tight liquidity in the market.

Jaideep Bhattacharya, chief marketing officer, UTI Asset Management, said: “The liquidity in the system has reduced, especially after the outflow of cash on account of 3G auction and advance tax payments last month which have together sucked up more than Rs 1-lakh crore from the industry. Moreover, in light of the improvement in the credit offtake, banks are no longer investing in mutual funds as aggressively as they did in the past.”

That the bank money in MFs has begun to dry up is well evident from RBI data which shows the investment by commercial banks in mutual funds has reduced to just about Rs 26,000 crore for the fortnight ended July 16, ’10. A year ago, the investment by banks in the MFs was as high as `1,32,000 crore.

As far as corporate money is concerned, industry officials say that fund flows from this segment has more or less been constant with no major concerns on redemptions.