Monday, December 22, 2014


December 2014

The asset base of the mutual fund industry dropped by Rs 5,344 crore to Rs 10.90 lakh crore in November 2014 mainly on account of outflow from the 'money market' segment. The country's 45 fund houses together had an average AUM of Rs 10,90,309 crore at the end of November 30, 2014, down from Rs 10,95,653 crore in the preceding month, according to the data by Association of Mutual Funds in India (AMFI). The AUM data for individual fund house is not being disclosed. The monthly decline in AUM is largely on account of withdrawal from money market or liquid segment to the tune of Rs 52,460 crore during the month. Overall, mutual funds saw a net pullout of Rs 25,628 crore. The assets managed by mutual funds had crossed Rs 10 lakh crore mark for the first time in May 2014 on the back of a sustained rally in markets after the formation of a new government at the Centre.

According to the Securities and Exchange Board of India data on total investor accounts with 45 fund houses, the number of folios rose to 3.99 crore at the end of November 30, 2014 from 3.95 crore in the last fiscal (2013-14), registering a gain of 3.54 lakh. Growth is mainly on account of addition in equity fund folios, which was supported by sharp rally in the stock markets. Besides, the fund houses have clocked Rs 1.55 lakh crore net inflows in various schemes during the April-October period. The BSE Sensex surged by around 28% during the period under review on the back of hopes of economic reforms and heavy capital inflows. The equity category saw addition of more than eight lakh folios to over 3 crore investors at the end of October 31, 2014. The segment saw first rise in folios in the month of April 2014 after reporting a consistent decline in investor accounts in the past four years.

Thanks to inflows in existing schemes and new fund offers, equity mutual funds received net inflows of Rs. 4,963 crore in November 2014. A large part of the inflows came in existing funds (Rs. 9,282 crore) while new fund offers mopped up Rs. 1,014 crore. Investors pulled out Rs. 5,548 crore from equity funds, which resulted in net inflows of Rs. 4,963 crore (includes ELSS figures). Since the beginning of FY 2014-15, equity funds have seen positive inflows each consecutive month. So far, the industry has attracted inflows of nearly Rs.45,000 crore in April-November 2014. The AAUM of equity funds crossed Rs.3 lakh crore mark in November 2014 on account of mark to market gains and fresh inflows. The total AAUM of equity funds stood at 3.15 lakh crore as on November 2014. The Sensex rallied over 28,600 levels in November 2014 which boosted investor confidence in equities. AMFI data shows that four new close end equity funds were launched in November 2014 which collectively mopped up Rs.1,014 crore. Reflecting the positive sentiment among investors, equity funds saw an addition of over 1 lakh folios in November 2014. SEBI data shows that the total number of equity folios has crossed 3 crore in November 2014. Income funds saw net inflows of Rs. 18,844 crore in November 2014 on expectations of interest rate cut by RBI. In October 2014, the category witnessed inflows of Rs. 15,446 crore. Gilt funds, which saw continuous outflows in the recent past, witnessed inflows of Rs. 814 crore. A few fund houses had recently come out with gilt funds with maturity of 10 years. However, in the debt category, liquid funds saw net outflows of Rs.52,460 crore in November 2014. Gold ETFs continued to see redemption pressure as the category saw net outflows of Rs. 32 crore in November 2014. Meanwhile, other ETFs, which track the equity indices, received inflows of Rs. 492 crore in November 2014. Overseas fund of funds saw net outflows of Rs.128 crore in November 2014. Last month, overseas FOFs had witnessed a net outflow of Rs.49 crore. There are 31 international funds in the industry which manage Rs. 2,819 crore. All in all, the industry saw a net outflow of Rs. 25,628 crore largely on account of outflows from liquid funds.

The five biggest fund houses clocked 27% growth in net profit in the first half of 2014-15 compared to the same period last year. These five fund houses account for nearly 54% of the total AUM the mutual fund industry. UTI Mutual Fund has not been included because its half yearly results are not out. In addition, the figure for Reliance Mutual Fund is the gross profit before tax. The largest fund house HDFC Mutual Fund retained its position as the most profitable asset management company. However, ICICI Prudential Mutual Fund has witnessed the fastest growth in profitability, with its H1 net profit rising from Rs 81 crore in the previous year to Rs 123 crore in 2014-15. ICICI Prudential Mutual Fund has shot past Reliance Mutual Fund to become the second-largest fund house in the country. In the past one year, its AUM has increased by 50%. However, even Reliance Mutual Fund reported a sharp 41% rise in its gross profit in the first half of this year and a 31% rise in its AUM.

Retail participation in mutual funds from beyond the top 15 cities in the country has increased 33% in the past 18 months, due to joint efforts made by the mutual fund houses and stock market regulator SEBI, says AMFI. The mutual fund industry's assets under management (AUM) crossed Rs 1,07,000 crore from retail investors living in places beyond the top 15 cities as on October 31, 2014. As on March 31, 2013 the AUM was Rs 65,000 crore, according the Association of Mutual Funds in India. The AUM relate to equities, equity-linked saving schemes (ELSS) and the balanced funds which essentially involves retail participation. Besides, mutual fund houses adopted several districts on a voluntary basis which also attracted investors from smaller towns towards mutual funds.

Piquant Parade

Japanese life insurer Nippon Life is set to increase its stake in Reliance Capital Asset Management (RCAM) to 35%. Currently, Nippon holds 26% stake in RCAM. The company will invest Rs. 657 crore in the current financial year to acquire an additional 9% in RCAM. The Japanese insurer can increase its stake to 49%, subject to necessary regulatory approvals. However, it will take nearly 2 years to reach this limit due to compliance issues. The company has reached a definitive agreement with Reliance Capital for raising Nippon Life’s ownership in Reliance Asset Management. 

Mutual fund houses are getting innovative in talking about the benefits of investing in mutual funds in their investor awareness programs (IAPs). UTI Mutual Fund and Axis Mutual Fund have recently launched their audio visual campaign on social media. A few months back, Birla Sun Life ran a similar campaign called ‘Janoge tabhi toh manoge’ which aimed at busting the myths associated with mutual funds. Fund houses are promoting their campaigns through social media platforms like YouTube, Facebook, twitter, and whatsapp. UTI Mutual Fund launched a campaign called ‘Haq, ek behtar zindagi ka’ (Right to lead a better life) to mark its 50th anniversary. The first commercial went on air on November 11 on Youtube and other social networking websites. In its latest commercial, it tries to touch the emotional chord of people by showing a son fulfilling his father’s dream. Axis Mutual Fund has released a 2.28 minute long video which is aimed at raising awareness about tax saving through mutual funds. 

The National Stock Exchange has launched a pilot version of its platform called MF Simplified for mutual fund distributors. The platform will be launched within a month. In fact, the company has started demonstrating the product feature to distributors. The platform will provide investors a common account number which can be used to invest across AMCs. Around eight AMCs have signed up with the platform. This common number will enable distributors and their clients to submit multiple requests across schemes of various fund houses using a single application. Moreover, the platform will provide online transaction facility to investors as well as distributors. Distributors can get direct membership on this platform and transact directly on the stock exchange platform under their own ARNs. This means that mutual fund distributors will get commissions directly from AMCs. To get membership on NSE’s new platform, distributors have to shell out a onetime processing fee of Rs. 2,500 along with a refundable deposit of Rs.15,000 (for individuals and others) while corporates have to pay Rs. 25,000. In addition, members have to pay an annual renewal fee of Rs. 2,000. This is the second platform being designed especially for IFAs. Its old platform ‘Mutual Fund Service System (MFSS)’ will continue to function. NSE has tied up with CAMS to develop this platform.

…to be continued

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