Mutual Funds Update from CRISIL India

All CRISIL Mutual Fund indices with the exception of the CRISIL MF~Gilt index posted positive returns in July 2008. The CRISIL Fund~eX (which tracks diversified equity funds) with returns of 5.40 per cent in July was in line with the benchmark S&P CNX Nifty which ended the month at 7.24 per cent over the earlier month.

The hybrid CRISIL Fund~bX (which tracks balanced funds) was up by 3.76 per cent, while the CRISIL MIPEX, (benchmark for monthly income plans) which has a lower equity component, posted returns of 0.97 per cent. Among pure debt indices, the CRISIL Fund~dX (which tracks Long-Term Bond Funds) ended 0.43 per cent up while the CRISIL STBEX (benchmark for Short-Term Bond Funds) gave monthly returns of 0.29 per cent while the CRISIL~LX Index ended up by 0.71 per cent. The CRISIL MF~Gilt Index however gave negative returns of 0.15 per cent.

Banking Sector Funds - the top performers in the equity mutual fund space. In the equity category, banking sector funds performed well with relief rallies in banking stocks driven by valuations becoming attractive after a prolonged southward movement." Reliance Banking Fund posted 13 per cent returns for the month ended July 2008 followed by the UTI Thematic - Banking Sector Fund with 11.50 per cent gains and JM Financial Services Sector Fund with 10.12 per cent returns.

There were six diversified equity oriented schemes which gave over 10 per cent returns during the 1-month ended July 31, 2008. Of these, the top four schemes belonged to LIC Mutual Fund, viz., LICMF Growth Fund (12.3 per cent returns), LICMF Equity Fund (11.47 per cent returns), LICMF Infrastructure Fund (11.29 per cent returns) and LICMF Opportunities Fund (10.8 per cent returns).

The Indian mutual fund industry's average assets under management (AUM) fell for the second consecutive month in July to Rs.5.31 trillion from Rs.5.66 trillion in June 2008 (including fund of funds). The decline by over 6 per cent in mutual fund assets can be attributed to redemptions due to volatile equity markets, tightness in money market, an unfavourable inflation outlook as well as on prospects of interest rates moving northwards after RBI hiked repo rates by a higher-than-expected 50 bps to 9 per cent and raised banks' CRR (cash reserve ratio) by 25 bps to 9 per cent in its latest quarterly monetary policy review.