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Monday, May 25, 2020

Market sell-off hits investor AUM, but fresh investments insulate MFs

The decline in equity AUM is much lower than the mark to market losses (on account of the fall in the equity markets) and industry players say it has been compensated by continued net inflows from investors.

Written by Sandeep Singh | New Delhi | Published: April 7, 2020 3:10:00 am
 BSE Sensex, BSE today, sensex tday, assets under management, Mutual Funds, Mutual Funds ector, Mutual Funds news Even as foreign portfolio investors (FPIs) have been busy selling and exiting Indian markets amid the rising concern over global growth, following the spread of coronavirus, domestic institutional investors (DIIs) have emerged as big investors.

Though the sharp fall of around 30 per cent in the value of benchmark indices — Sensex, mid cap and small cap — at the BSE has resulted in big losses for equity mutual fund investors, asset management companies seem to be largely unaffected by the same and their average equity assets under management (AAUM) has declined marginally by 0.6 per cent in the three-month period.

According to the data available at AMFI and collated by Myplexus.com, a mutual fund research and advisory firm, the AAUM of all equity schemes (including equity linked savings scheme, exchange traded funds and index funds) for the month of March aggregated to Rs 7,69,110 crore. This was down by Rs 4,525 crore or 0.6 per cent from an AAUM of Rs 773,635 crore, in December 2019.

The decline in equity AUM is much lower than the mark to market losses (on account of the fall in the equity markets) and industry players say it has been compensated by continued net inflows from investors. While the data of net inflow for March is yet to be released by the Association of Mutual Funds in India (AMFI), the net inflows into equity schemes for January and February amounted to Rs 7,877 crore and Rs 10,795 crore, respectively.

Even as foreign portfolio investors (FPIs) have been busy selling and exiting Indian markets amid the rising concern over global growth, following the spread of coronavirus, domestic institutional investors (DIIs) have emerged as big investors.

Explained

Investors hold their nerves

The stability in MF industry AUM despite a sharp fall in benchmark indices shows that while investors resisted from selling their holding, but they also looked to use the fall as an opportunity to make fresh investments.

While FPIs sold their holdings worth a net of Rs 1,18,203 crore in March (Rs 61,972 crore from equity and Rs 56,230 crore from debt), DIIs pumped a net of Rs 55,595 crore into the capital markets during the month. The Sensex lost over 23 per cent in March as concerns grew on global growth over the next couple of years.

Mutual fund industry participants say the behaviour of the investor has been very surprising and, at the same time, encouraging for them as despite the sharp falls in the market, investors have stayed with their investments and have not gone for redemptions. Several participants say while investors have continued with their monthly investments through systematic investment plans, several investors have also taken the fall in the markets as an opportunity to make fresh investments.

Top executives with two leading mutual fund houses said even as the markets fell sharply ,they did not witness any redemption pressure. “In fact, we have seen investors continuing with their scheduled investments and also coming with fresh investments. It is a very healthy development and shows that investors have become far more mature now,” said the CEO of an AMC.

“This investor behaviour is in contrast to what we have seen in the difficult periods over the last two decades such as the financial meltdown and other pandemics like SARS. This points to the huge leap in maturity of average investor and more importantly the optimism that permeates through them,” said Prasunjit Mukherjee, CEO, Plexus Management Services. Between December 31, 2019 and March 31, 2020, the Sensex fell 28.6 per cent and the mid-cap and the small-cap indices at the BSE fell 29.4 per cent and 29.9 per cent, respectively. However, the MF AUM data shows in the three-month period period, several categories of equity schemes witnessed an increase in their AUM. For example, the mid-cap fund category saw a rise in average AUM by Rs 3,886 crore (4.75 per cent), schemes in the small-cap fund category saw an aggregate increase in AUM of Rs 1,374 crore (2.92 per cent) and the focussed fund category witnessed an increase of Rs 1,215 crore (2.95 per cent) in the AUM for the period. The index funds (4.6 per cent) and open-ended ETF category (7.4 per cent) saw gains in their AUM.

Among the categories of equity funds that saw a fall in AUM were multi-cap fund (-0.92 per cent), large-cap fund (-2.8 per cent), ELSS (-1.5 per cent) and equity value fund (-8.2 per cent).

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