FUND FULCRUM

March 2015

The Indian mutual fund industry's assets under management rose 1.76% or by Rs 20,840 crore to Rs 12.02 lakh crore in February 2015, according to the monthly numbers released by the Association of Mutual Funds in India. This is the first time the industry's assets have crossed the Rs 12 lakh crore mark. Gains were led by inflows into equity, balanced, gilt, and liquid funds, according to CRISIL Research. Positive sentiment for the underlying asset class helped equity funds attract net inflows for the tenth consecutive month in February 2015. The category's assets rose 1.41% to close at a record high of Rs 3.46 lakh crore. The underlying asset class, represented by the benchmark CNX Nifty Index, gained 1.06% in the month on positive cues from announcements in the Union Budget 2015-16, upbeat domestic GDP growth estimate, and encouraging international developments. Balanced funds, which invest a major portion of their AUM in equity, also continued to benefit from the upbeat sentiment in the equity market and attracted net inflows for the ninth consecutive month. The category's AUM was up by Rs 715 crore to Rs 26,507 crore  - its record high asset tally. Hopes of easing interest rates by the Reserve Bank of India pushed gilt funds to touch a new peak of Rs 13,180 crore in February 2015. AUM increased 19% or by Rs 2,105 crore primarily due to inflows of Rs 2058 crore (sixth consecutive rise) in the month. Liquid/ money market funds reported net inflows of Rs 8,784 crore, giving a boost to the total industry assets. Inflows into the category are a part of the cyclical inflows which occur in the first two months of the quarter (January-February) before being withdrawn for quarter-end requirements (to pay corporate advance tax) in the last month of the quarter (March). The category's AUM rose 4.04% or by Rs 10,712 crore to Rs 2.76 lakh crore. Income funds' assets rose to a new high of Rs 5.22 lakh crore, up 0.41% or Rs 2,132 crore, due to mark-to-market (MTM) gains in the underlying assets. Open-ended and interval schemes posted net inflows of Rs 8,486 crore and Rs 164 crore, respectively, while closed-ended schemes posted net outflows of Rs 8802 crore, resulting in net marginal outflows of Rs 152 crore for the category. Gold ETFs' assets fell 5.53% or by Rs 401 crore to Rs 6844 crore due to persistent redemption pressure and MTM losses; the latest asset tally is the lowest for the category since July 2011. The category registered net outflows of Rs 74 crore for the twenty-first straight month as subdued performance of the underlying asset discouraged investors. The price of gold (represented by the CRISIL Gold Index) fell 4.26% in February 2015.

Mutual funds pumped in Rs 5,200 crore in equity schemes in February 2015, taking the total inflow to over Rs 61,000 crore in the first 11 months of the current financial year on the back of positive returns. It was the twelfth consecutive month when equity mutual funds witnessed an inflow. According to the latest update available with Association of Mutual Funds in India, equity funds saw net inflow of Rs 5,217 crore in February 2015 as compared to Rs 5,850 crore witnessed in January 2015. The latest inflow takes the total fund infusion in equity mutual fund schemes to Rs 61,089 crore at the end of February 2015. However, equity funds witnessed an outflow of Rs 5,526 crore during April-February 2014. This inflow has helped in increasing mutual fund equity assets base to Rs 3.07 lakh crore in February 2015 from Rs 1.57 lakh crore a year ago. Equity markets have delivered positive returns that attracted retail investors into such schemes.

According to the latest data on investor accounts with 45 fund houses, the number of equity folios rose to 3.14 crore last month, from 2.94 crore during the full fiscal 2013-14, a gain of 20 lakh folios. April 2014 saw the first rise in folio count in more than four years. Prior to that, the equity mutual fund sector had seen a continuous closure of folios since March 2009 after the market crashed in late 2008 due to the global financial crisis. Since March 2009, the sector has seen a closure of 1.5 crore folios. The investor base reached its peak of 4.11 crore in March 2009, while it was 3.77 crore in March 2008. A strong rally in equity markets and the consequent rise in investors' interest led to a sharp increase in retail folios. The addition in equity folios is in line with BSE's benchmark Sensex surging by 31% in the period under review. Moreover, mutual funds industry reported net inflows of over Rs 61,000 crore in equity funds in April-February period, which helped the industry grow its folio count. Overall, industry's retail folios surged to 4.2 crore at February-end 2015, from 4.05 crore at end of March 2014. 

Piquant Parade

MF Utility system has been launched across India on March 4, 2015. The transaction facility started from February 13, 2015 in Bangalore and Delhi, February 20, 2015 in Ahmedabad and Pune, and February 27, 2015 in Chennai and Kolkata. So far, 25 AMCs have signed up with MF Utility. Around 3,300 distributors from 460 cities have already signed up with MF Utility. User ids have been provided to distributors. Any distributor who has signed up with MFU can transact in 25 participating AMCs across 360 POS spread across the country. Distributors will be able to submit multiple transactions like purchases, redemptions, switches, etc. using a single application (Common Transaction Form-CTF). They need to open a common account number (CAN) for their clients using the CAN registration form (CRF) and submit these forms at the MFU POS. CAN is a single master number applicable to all AMCs participating in MFU system. Through CAN, distributors can submit multiple transactions across schemes of various AMCs using a single application (CTF). The payment has to be made to MFU. Mutual fund investments will become simpler with the introduction of the common account number (CAN) by MF Utilities India (MFUI). The benefits of transacting by using CAN are multifold. CAN provides one reference number for all mutual fund investments made besides doing away with the need for opening an account with each fund house to invest in their schemes. In addition, investors get a single view of all their MF investments besides having the convenience of submiting change requests (such as change of address) at a single point. MF Utility provides a single transaction form for transacting in multiple schemes across mutual funds. A single time-stamp is given for all transactions appearing in the form. A single payment instrument for multiple investments does away with the burden of handling multiple instruments. All these can be done through a common mandate registration form where one can mandate for multiple SIP (systematic investment plan) registrations, lump sum investments and multiple modes of payment. A single window for complaint redressal — registering a complaint, tracking and redressal — has also been provided. For those who are not KYC (know your customer) compliant, proof of identity and proof of residence should be furnished for completion of the KYC process. Individuals/entities that are already KYC-compliant with a SEBI registered intermediary (broker/ DP/ mutual fund and the like) have to quote their permanent account number (PAN), which is immediately verified by an MFUI representative.

Franklin Templeton Mutual Fund won as many as five awards at the Morningstar Fund Awards event held in Mumbai. Besides winning the best equity and multi-asset fund house award, FT won three more awards in the large cap (FT India Prima Plus Fund), small/mid cap (FT India Smaller Companies Fund), and short term bond fund (FT India Short Term Income Fund) category. Launched in 1994, FT India Prima Plus Fund has delivered a CAGR return of 20% since inception, according to Value Research data. FT India Smaller Companies Fund, which manages AUM of Rs. 1,959 crore as on February 2015, has delivered a CAGR of 16% since launch. A total of five fund houses won awards across eight categories. In the equity category, Axis Long Term Equity Fund won the best ELSS award. Launched in December 2009, this fund has delivered a CAGR of 25% since launch, according to Value Research data. The fund manages AUM of Rs. 4,424 crore as on February 2015. ICICI Prudential Balanced Fund and HDFC Multiple Yield Fund were the winners in the moderate and conservative allocation category. In addition, HDFC Floating Rate Income Fund - Long Term Plan won the best ultra-short term bond award, FT India Short Term Income Fund bagged the best short-term bond fund award while Birla Sun Life Dynamic Bond Fund bagged the award in intermediate bond fund category.

Foreign fund house JP Morgan Asset Management is believed to be mulling over sale of its India mutual fund business, which manages assets worth over Rs 14,000 crore. JP Morgan has begun discussions for a possible sale of its Indian mutual fund arm. JP Morgan could become the fourth foreign fund house in little over a year to exit the Indian mutual fund industry, although its asset base has grown rapidly in the recent past. The total asset base of Indian mutual fund business crossed Rs 12 lakh crore in February 2015, although the industry is highly scattered with nearly 45 players with most of them having small businesses. Only four found houses have average AUM of more than Rs 1 lakh crore each and these include HDFC, Reliance, ICICI, and Birla Sunlife Mutual Funds. The fund houses have seen robust capital inflows in the recent months, while their asset base has also been getting a major boost from the strong performance of their equity schemes. JP Morgan received capital markets regulator SEBI's approval to start mutual fund business in India in February 2007. It had average AUM of Rs 14,123 crore at the end of December 2014. Since December 2013, three international players -- Morgan Stanley, ING, and PineBridge -- have announced selling their mutual fund businesses in the country.

to be continued…