Mutual funds fend off mauling by bearish markets

While the stock markets had to face frequent bear mauls last month, the injuries did not quite manage to cramp the mutual fund...

While the stock markets had to face frequent bear mauls last month, the injuries did not quite manage to cramp the mutual fund (MF) industry. Proof lies in the fact that of three new fund offers (NFO) launched during this period, two have reportedly got very good response from investors.

“Though we had expected a higher subscription for our Special Situations Fund, we managed to get good response in the face of market fall and our NFO clashing with Reliance Power IPO,” said A Balasubramanian, CIO, Birla Sun Life. “We raised close to Rs 1,000 crore and the retail participation has been excellent.”

During this volatile period the MF industry saw a dip in its assets under management (AUM) “but it was marginal,” said Nilesh Shah, CIO of ICICI Prudential Mutual Fund. “Investors showed interest in both existing and new schemes. But I feel that investors’ response was quite high for some NFOs,” he added.

According to Dhirendra Kumar, CEO, Value Research, a mutual fund tracking firm, “Reliance Natural Resources Fund which closed on January 30 is expected to have collected Rs 3,000 crore. The third NFO open in this period, AIG Infrastructure and Economic Reforms Fund, “will also have a good sum of money to manage,” he added.

However, the MF industry felt the jitters. While it had delivered returns of over 50 per cent during the past 12 month period, it fell drastically, following the market itself, during January. Reliance Diversified Power Sector Fund, which had been a star over the last year giving 88 per cent returns, saw its returns in the negative, falling 16.9 per cent last month.

Overall, the industry AUM saw just a small decline in January. New investors continued to enter at low levels, and used the buying opportunities to buy NFOs and existing equity and debt funds, said Shah. Of the 32 fund houses, 14 registered an increase in AUM in January, noted a CRISIL report. Despite market fall, mutual funds were net buyers in the secondary equity market, buying Rs 77 crore in January 2008, up from Rs 30 crore in December 2007.