FUND FULCRUM

April 2018

Association of Mutual Funds in India (AMFI) expects the mutual fund industry’s assets under management to grow by almost five-fold to Rs 94.5 lakh crore by FY25 on the back of the increased distribution strength and reach and the joint efforts of SEBI, AMFI, fund houses and distributors. As at the end of February 2018, the asset base of the 43-player mutual fund industry stood at Rs 22.2 lakh crore. During the last one year mutual fund industry witnessed AUM growth of 25 percent, or Rs 4.25 lakh crore. During the same period, the total number of folios and SIP accounts saw a growth of 26 percent, or Rs 1.08 crore, and 52 percent (70 lakhs), respectively, while the monthly SIP contribution for the industry touched Rs 6,425 crore from 2.05 crore SIP accounts. The mutual fund industry has added 32 lakh new investors after the launch of ‘Mutual Fund Sahi Hai’ campaign one year ago. AMFI now aims to add 50 lakh new investors by the end of FY 2018-19.

Investors pumped in over Rs 1.7 lakh crore in equity-oriented mutual fund schemes in 2017-18, making it the fourth successive year of net inflows, according to data from the Association of Mutual Funds in India. Strong inflows have pushed the asset base of equity MFs by 38 percent to Rs 7.5 lakh crore during the period under review, according to AMFI data. The impressive inflow can be attributed to investor awareness campaign by the industry, role played by MF distribution platforms, demonetisation effect and strong retail participation from retail investors, especially from smaller towns. According to AMFI data, equity funds, which also include equity-linked saving schemes (ELSS), saw net inflows of Rs 1,71,069 crore in 2017-18, much higher than Rs 70,3674 crore infusion in the preceding fiscal. These funds had seen net inflows of Rs 74,024 crore and Rs 71,029 crore in 2015-16 and 2014-15, respectively. Prior to that, they had witnessed a withdrawal of Rs 9,269 crore. The AUM of equity MFs scaled a record high of Rs 7.5 lakh crore at the end of March 2018 from Rs 5.43 lakh crore at the end of March 2017.

The Indian equity market fell by over 3 percent in March 2018, and this was mirrored by a fall in mutual funds' AUM, which fell to Rs 21.36 lakh crore from Rs 22.20 lakh crore recorded in February 2018. The equity AUM, including equity linked savings schemes (ELSS), balanced funds, and other exchange traded funds (ETFs), came in at Rs 9.95 lakh crore, down from Rs 10.21 lakh crore seen last month. This is 47.9 percent higher than the Rs 6.73 lakh crore recorded in March last year. Domestic mutual funds bought stocks worth Rs 9,255 crore in 19 trading sessions. However, this was significantly lower than the Rs 16,180 crore seen in February. Fund managers bought 15 stocks for the first time in March 2018, which includes numerous recently-listed stocks like Bandhan Bank, ICICI Securities, Bharat Dynamics, Sandhar Technologies, Lemon Tree, Mishru Dhatu Nigam and Hindustan Aeronautics, among others. On the other hand, fund managers exited as many as 8 stocks for the first time, including Pokarna, Jay Bharat Maruti, Avadh Sugar & Energy, Welspun Corp, MBL Infrastructure, Hexa Tradex, Shreya Shipping and Arvind Smartspaces. Sequentially, AUM of equity funds decreased by 3.8 percent, or Rs 26,663 crore, to Rs 6.69 lakh crore in March 2018. Of the total, AUM in ELSS decreased by 0.5 percent, or Rs 398 crore, to Rs 80,583 crore. Equity funds saw a net inflow of Rs 2,954 crore, while ELSS saw a net inflow of Rs 3,703 crore. So the total inflow into equity mutual funds was around Rs 6,657 crore. Net outflow from the mutual fund industry stood at Rs 50,752 crore in March 2018, as against a net inflow of Rs 12,091 crore in February 2018. The month-on-month (mom) decline mostly reflects an end-of-quarter phenomenon, wherein companies tend to redeem investments in liquid funds for advance tax payments. Data shows that of the last 21 end-of-quarter months, AUM declined in 20 of them, according to an ICRA report.

Among the top five players, ICICI Prudential MF led the pack with asset base of Rs 3,05,739 crore (excluding Fund of Funds) followed by HDFC MF (3,00,549 crore), Reliance MF (Rs 2,44,903 crore), Aditya Birla Sun Life MF (Rs 2,47,529 crore) and SBI MF (Rs 2,17,649 crore). The top 10 fund houses boast 81% market share. These fund houses jointly manage Rs.18.63 lakh crore as on March 2018. While two fund houses – ICICI Prudential and HDFC – have crossed the Rs.3 lakh crore milestone, Franklin Templeton has become the eighth fund house to enter the Rs.1 lakh crore club with assets of Rs.1.03 lakh crore last fiscal. HDFC MF, ICICI Prudential MF and SBI MF registered the highest growth in absolute terms with each of them adding over Rs.60,000 crore to their AUM kitty. Among the top 10 fund houses, SBI MF (39%) was the fastest growing fund house followed by Kotak MF (35%), Axis MF (34%) and DSP BlackRock (32%). Among the bigger fund houses, L&T MF too registered an impressive growth of 68%. In terms of percentage growth, emerging fund houses like Motilal Oswal and Mirae Asset have recorded maximum growth of 119% and 111% respectively. Of the 39 AMCs, six fund houses – DHFL Pramerica, LIC, Indiabulls, Taurus, Escorts and Sahara – witnessed a decline in their yearly AUM.

The total assets under management of the Indian mutual fund industry stood at Rs21.4 lakh crore as on March 31, 2018, according to the latest data from the Association of Mutual Funds of India (AMFI). The same had stood at Rs22.2 lakh crore on February 28, 2018. The inflows in equity mutual funds stood at Rs39,102 cr in March 2018, a 21% mom growth. However, the outflows grew a significant 105% mom to Rs36,148cr in March 2018, which, consequently, led to an 80% mom dip in net inflows to Rs2,954cr during the month. Since both inflows and outflows in equity mutual funds increased in March 2018, the slump in net inflows could be attributed to the following reasons:

•       Investors booked tax-free, long-term capital gains before April 01, 2018 (as 10% LTCG tax is in effect from April 01, 2018), and reinvested in equity mutual funds.

•      Investors switched from dividend option to growth option as 10% DDT on dividends from equity mutual funds is also applicable w.e.f April 01, 2018. Switching from one option to another option in the same scheme is counted as redemption and fresh investment.

In FY2018, equity mutual funds recorded a mammoth Rs1.57 lakh crore in net inflows against Rs60,270cr recorded in FY2017 as investors increased their equity allocation with hopes of higher returns.

Piquant Parade

CAMS has introduced a new feature in its investor mailback service that can help investors calculate long term capital gains tax liability. The R&T agent has launched a modified capital gain/loss statement to include LTCG for equity funds and consolidated statement for grandfathered equity schemes. The enhanced capital gain/loss statement will assist investors to comply with the new long-term capital gains tax for equity funds announced in the budget this year. The enhanced capital gain/loss statement will allow investors to view their consolidated capital gains/losses across all mutual funds that are serviced by CAMS. In addition to providing short term and long-term capital gain /loss, the statement will also provide the original cost and the net asset value as on 31st January 2018. As the statement will be available for perpetuity, investors can access the statement at any time in the future. With the Union Budget 2018 exempting gains accrued in equity-oriented schemes until January 31, 2018, this statement will serve investors with a single view of unit balance, net asset value (NAV) and fair market value as on January 31 2018 for grandfathered equity schemes across the CAMS serviced funds. Investors can use the statement as a ready reckoner to review their equity holdings with January 31, 2018 valuation. CAMS is the service partner to 15 mutual funds and serves 64% of the mutual fund industry assets.

   

Softbank-backed Paytm is planning to enter India’s mutual funds industry with the launch of a new digital platform by the end of April 2018. Paytm's upcoming Android and iOS applications will offer investors mutual funds from 12 of the 15 largest asset management companies (AMCs) in the first phase, with an aim to increase the number of investors to 25 by August 2018. The digital wallet's entry may add one more distributor in the list of asset management firms as Paytm claims to have a customer base of more than 30 crore. The firm plans to carry out distribution through Securities and Exchange Board of India (SEBI)-registered Paytm Money, another unit of One97 Communications Ltd, which also owns Paytm and Paytm Payments Bank. Paytm Money is considering options to include a very small transaction or subscription fee for its investment platform. To avoid distributor commissions embedded on higher expense ratios, Paytm is planning to sell only direct plans with lower expense ratios. Paytm aims to provide a direct plan for investors without the help of a distributor directly from an investment adviser who is registered with SEBI. Considering that half of Paytm’s transactions occur in small towns, Paytm's entry may help in the expansion of the mutual funds market beyond the top 15 towns, which has been on the rise. In 2017, only 28 percent of individual investors’ assets in mutual funds come from “B15”, or “beyond the top 15” towns according to Association of Mutual Funds in India.

AMFI and Times Network have jointly launched a new IAP campaign titled ‘Jan Nivesh’. Jan Nivesh campaign aims to educate and encourage people to change their financial habits by investing regularly in mutual funds. The campaign will urge citizens to take a pledge to invest one day’s income in mutual funds every month.

Computer Age Management Services (CAMS) has introduced a new facility called PAN based e mandate through which your client can set up SIP online by using eSign facility. The e-mandate facility will help MF distributors to reduce the SIP registration cycle to just two to three days, as compared to two to three weeks earlier. Currently, MF distributors register paper based mandates for their investors, which is time consuming as it involves obtaining signature of an investor on the form and submission of physical form at service centre for processing. The conventional method to set up SIPs with a mandate involved laborious practices like filling out forms, cheque copy, submission to bank via mutual funds / registrar, registration process at the bank and eventually starting the SIP only after 30 days. Investors had to repeat the process for every new SIP.  CAMS e Mandate will aim at transforming the way mandates are registered with a complete digital process.” You can use this facility on CAMS website and mobile app myCAMS. The company plans to avail this facility on the websites of AMCs and distributors in future. Here are the key features of e mandate facility

•      This is a completely paperless process. The only requirement is Aadhaar link in the bank account where the mandate has to be registered.

•         This will be free from restrictions like date and number of transactions as it will be set up for ‘As and when presented’ option. 

•          Currently, maximum limit for e-mandate is Rs.1 lakh

•          e-mandate can be registered for the banks enabled by NPCI 

•          Investors can also do lump-sum purchase through this facility.

SEBI has asked Sahara Mutual Fund to wind up its mutual funds business by April 21, 2018. However, the fund house can run its ELSS Sahara Tax Saving Gain Fund for four more months as such funds come with a lock-in period of three years. The fund house will have to return the money of all unit-holders by August 27, 2018. This means, Sahara MF will have to compulsorily redeem the units allotted to its investors and credit the respective funds to its investors without any additional cost, within the given date. SEBI clarified that the fund house cannot accept fresh business during this period. SEBI has directed its R&T Karvy Computershare to ensure the redemption proceeds of all unit holders reaches before the stipulated date. Sahara MF will surrender its certificate of registration to SEBI by August 27, 2018. The fund house manages AUM of Rs.64 crore as on March 2018.

…to be continued