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Mutual fund assets rise by Rs 47,000 crore in January

* Growth due to inflows in money market funds and gains in equity funds

Written by ENS Economic Bureau | Mumbai |
February 11, 2012 12:57:50 am

The mutual fund industry’s month-end assets rose by over 8 per cent,or Rs 47,700 crore to Rs 6,59,000 crore in January on the back of inflows in money market funds and mark-to-market gains in equity funds.

Expectedly,money market funds witnessed inflows of Rs 26,400 crore in January. As seen historically,quarter-end outflows in the category are reversed in the subsequent month (December witnessed outflows while January saw inflows) as corporates re-invest their surplus funds that were withdrawn to pay advance tax. As a result,assets under money market funds rose to Rs 1,48,000 crore compared with Rs 1,21,000 crore in December.

Mark-to-market gains in equity funds was another positive factor for mutual funds in January. The equity market represented by the benchmark S&P CNX Nifty rose around 12 per cent in the month on the back of positive global and domestic cues. This is the first monthly gain for the equity market since October 2011. Assets under equity funds surged by Rs 18,400 crore,or 11 per cent,to Rs 180,000 crore,primarily due to rise in the underlying markets,as per Crisil data.

Gilt funds recorded the highest inflows since September 2010 of over Rs 521 crore in January,the second consecutive month of inflows. Sentiments for gilt funds have risen on views of peaking of interest rates and easing of monetary policy going forward. This is expected to benefit long-term debt funds including gilt funds. The 10-year benchmark gilt yield has fallen nearly 50 basis points since November 2011 (prices / fund returns are inversely related to yields). Assets of gilt funds rose around 20 per cent in the month to Rs 3,731 crore in January.

Income funds (including ultra short-term debt funds) saw outflows of Rs 2,900 crore in January,the third consecutive month of outflows for the category. This is the first time since November 2008 that the category has witnessed outflows for three consecutive months.

A reason for outflows could be investor preference to move out of ultra short-term debt and short-term funds present in this category towards other long-term debt avenues.

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