Mutual fund assets touch record Rs 9.03 lakh crore in January

MUMBAI: The Indian mutual fund industry's assets under management ( AUM) rose 9.4% to a record high of Rs 9.03 lakh crore in January as inflows into money market or liquid funds jumped.

The money market or liquid funds (short-term financial instruments with maturities typically 90 days to less than one year) witnessed net inflows worth Rs 77,500 crore in January, the highest in last nine months, leading to a 43% rise in AUM to Rs 258,980 crore.

This was primarily due to periodic inflows in the banking system. Quarter-end outflows (December) in the category are typically reversed in the subsequent month (January) as banks and companies re-invest the surplus funds they withdraw to pay their quarter-end advance tax requirements. "Some improvement in the liquidity due to lending by the Reserve Bank of India (RBI) through its term repo window, purchases of gilts via open market operations by the central bank and capital infusion into state-owned banks by the government also contributed to inflows in the money market or liquid funds," said CRISIL Research in a report dated February 10.

Income funds (which include long-term, short-term and ultra short-term debt funds and fixed-maturity plans, or FMPs) reported net inflows of Rs 5,900 crore after two consecutive months of outflows in November and December. Inflows were primarily into short-term maturity debt funds and FMPs due to the attractive short-term rates caused by the RBI's monetary tightening measures.

"The mutual fund industry has finally started growing with plenty of liquidity. Interestingly, retail participation in the debt segment has gone up sharply in recent months," said Akshay Gupta, managing director and chief executive at Peerless Funds Management Company.

The Reserve Bank of India (RBI) hiked key policy rate - the repo rate - by 25 bps to 8% in January, the third hike since September 2013 to control rising inflation. One-year commercial papers (CPs) and certificates of deposit (CDs) traded at 10% and 9.64%, respectively, on January 31, 2014, compared with 9.92% and 9.28% on December 31, 2013.

Equity funds (including ELSS funds) recorded inflows for the third consecutive month in January at Rs 427 crore, though less than Rs 699 crore and Rs 857 crore seen in November and December, respectively. However, the AUM declined by 4%, or Rs 7,200 crore, to Rs 1.75 lakh crore, dragged lower by weakness in the underlying market. The benchmark index NSE Nifty declined 3.40% over the month on an emerging market sell-off.