The average Assets Under Management (AUM) of the mutual fund industry saw a nearly 4 per cent increase in September due to the rally in the market but redemptions continue to plague the industry, say experts.
The monthly AUM data for September, posted on the Association of Mutual Funds of India's Web site, may have gone up due to an increase in the Net Asset Values and not necessarily because of an increase in investor numbers, they say.
The AUM of the industry for September stood at Rs 7.12 lakh crore, up from Rs 6.87 lakh crore in August.
"Overall, the markets have done really well and that is reflected in the data. The global markets are stabilising and there have been fresh inflows, which will continue to come. The investors are also getting confident.
"However, redemptions still continue to exist and there could be some reason for concern there. But going forward, we are expecting some positive trends in the industry," said Mr Gopal Agrawal, Deputy C.I.O and Head – Equity, Mirae Asset Global Investments (India) Pvt Ltd.
Liquidity situation
Experts have noted an improvement in the liquidity situation in the markets which has led to better numbers in September.
"The reason for increase in AUM this month has been two-fold. Compared to August, September saw a rise in the money market funds and also an increase in the mark-to-market values in equity funds," said Mr Akshay Gupta, Chief Executive Officer, Peerless Funds Management Company Ltd.
As far as redemptions are concerned, there will be no respite from it, say analysts. "But these redemptions are now market-led," said Mr Gupta.
"Valuations in the market are very high. So, those who had invested in 2007-08 and had seen a massive drop of 50-80 per cent in 2008-09, will now want to get out of the market. These redemptions are more of opportunist selling and profit-booking," he added.
SIP route
While high redemptions and net outflows on the equity side continue to be cause for anxiety, there has been good news from the Systematic Investment Plan (SIP) side.
"The retail participation is seen happening here. At our retail counters, we have experienced high investor interest in the SIP route," said Mr K. Venkitesh, National Head – Distribution, Geojit Financial Services.
Looking forward, industry experts say that AUMs will continue to increase, albeit in small doses, and that there will not be in any dramatic increase, as was experienced earlier.
The credit off take, all-time high interest rates and high market valuations have ensured that there will be no dramatic increase either in the debt/fixed income or the equity side of the industry, they said.
Source: http://www.thehindubusinessline.com/2010/10/03/stories/2010100352030300.htm
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