It’s boom time in mutual fund sector

It's party time for mutual funds after a long time. The sharp jump in Sensex to record levels has seen huge inflows of funds into the MF ban...

It’s party time for mutual funds after a long time. The sharp jump in Sensex to record levels has seen huge inflows of funds into the MF bandwagon in the last eight months. With the Sensex rising by over 100 per cent since April, MFs have recorded net inflows of Rs 46,315 crore in April-December 2003. This is the maximum inflow recorded by Indian MFs in the near future. Net asset values of equity schemes have also shot up in an identical manner in the last eight months.

According to Sebi data, equity-oriented schemes mopped up Rs 3,773 crore in the same period. “This is a big turnaround for MFs. After the 2000 stock crash, mutual funds had seen a big erosion from their equity schemes,” said a fund manager.

The assets under the management (AUM) of MFs as on December 31 stood at Rs 1,40,094 crore with debt schemes having a share of Rs 1,09,878 crore and equity (growth) schemes at Rs 24,831 crore, SEBI said. This means 78 per cent of the inflow is going into debt schemes. This also shows that investors are still betting on debt schemes. This may be due to the bad experience of investors in the previous bull runs.

MFs mobilised Rs 4,22,371 crore while their repurchase and redemptions stood at Rs 3,76,055.33 crore during the April-December period. It’s true that the boom in stock markets from May-June 2003 has attracted investors to equity schemes of MFs and they parked their funds in existing schemes and subscribed to new schemes. “I don’t expect funds to move out from equity to debt or vice versa. Both will co-exist,” said Tata MF CEO V. P. Chaturvedi.

The private sector MFs raised Rs 3,88,225 crore while their redemptions and repurchases stood at Rs 3,44,517 crore with assets of Rs 1,09,119 crore. There has been a solid growth of 170 per cent in the monthly income plans (MIPs) during the last four months. MF players are now offering MIPs with an equity pie of 25 to 30 per cent as compared to the earlier 15 to 20 per cent. MIPs added Rs 3,553 crore to their corpus in the last three months, while income funds, the most popular among the debt schemes have seen an erosion of Rs 4,150 crore from their corpus in the same period.

Last month, a host of players launched MIPs to catch the pulse of the market. Significant among them are players like HDFC Mutual Fund, IL&FS Asset Management Company, Principal Mutual Fund, Reliance Capital Mutual Fund and Sundaram Asset Management Company. Some fund managers are of the opinion that fresh inflows into equity-dedicated schemes has been on the rise due to the IPOs of equity-related schemes, especially MIPs.

‘‘It’s only the beginning of the good times to come,’’ says ING Vysya Mutual Fund MD & CEO Kavita Hurry. Her fund launched two schemes recently to attract the conservative investor.

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UTI Mutual Fund remained the top mutual fund in the country even after the erstwhile UTI was split into two companies. UTI MF raised Rs 12,634 crore and saw redemptions and repurchases of Rs 12,447.32 crore. The total assets as on December 31 stood at Rs 19,058 crore.