Tuesday, February 12, 2008

Mutual Fund AUMs resilient to market crash in January: CRISIL

Indian mutual fund assets under management (AUM) reduced only marginally by Rs.22 billion (0.40 per cent) to Rs.5.52 trillion as on January 31, 2008, from Rs.5.54 trillion (including fund of funds) as on December 31, 2007, despite a sharp correction in the equity markets. The benchmark S&P CNX Nifty lost more than 16 per cent in January 2008 over the previous month.

Said Mr. Krishnan Sitaraman, Head - Fund Services & Fixed Income Research, CRISIL FundServices, "The mutual fund AUMs were, by and large, resilient to the stock market crash. New investors continued to enter at the low levels, and look out for buying opportunities, new fund offers and inflows into debt funds. Of the 32 fund houses, as many as 14 actually registered an increase in AUMs in January." Despite the market fall, mutual funds were net buyers in the secondary equity market, by Rs.77 billion in January 2008, up from Rs.30 billion in December 2007.

Sectoral indicators
Three of CRISIL's mutual fund indices (those with equity components) ended negative in January 2008, after four consecutive months of positive run. Debt market indices (save CRISIL MIPEX), on the other hand, not only ended positive in January 2008, but largely also exceeded the returns in December 2007.

The equity category, represented by CRISIL Fund~eX, posted gains of a negative 16.50 per cent, almost in line with the fall in S&P CNX Nifty. CRISIL Fund~bX, the index for balanced funds, posted negative returns of 11.71 per cent in January, while CRISIL MIPEX, the index used as a benchmark for monthly income plans, had returns of a negative 1.61 per cent.

Among debt funds, CRISIL MF~Gilt (the gilt funds index) again reported the highest returns (of 2.72 per cent), followed by CRISIL Fund~dX, the long-term bond funds index (of 1.31 per cent). CRISIL STBEX, the debt index serving as benchmark for short-term bond funds, posted returns of 0.73 per cent, while CRISIL~LX, the index for liquid funds, had returns of 0.66 per cent.

Activities on the regulatory front
Among key regulatory activities in the month, the Securities and Exchange Board of India (SEBI) board approved removal of charging and amortisation of initial issue expenses in close-ended mutual fund schemes. Henceforth, all mutual fund schemes will, therefore, meet expenses connected with sales and distribution of schemes from the entry load. Consequently, waiver of load for direct applicants will also be available in close ended schemes.
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