FUND FULCRUM

December 2013

 

Investors have put in more than Rs 1.5 lakh crore in various mutual fund schemes in the financial year 2013-14 so far, nearly twice the amount pumped in by them in the entire financial year 2012-13. According to the latest data available with SEBI, there was a net inflow of Rs 1,50,675 crore during the 2013-14 fiscal (April-November 2013) as against a net inflow of over Rs 76,000 in the preceding fiscal. Prior to that, a net amount of more than Rs 22,000 crore and over Rs 49,000 crore moved out of the mutual funds' kitty during 2011-12 and 2010-11, respectively. At a gross level, mutual funds mobilised over Rs 63 lakh crore during April-November period this year, while there were redemptions worth Rs 61.5 lakh crore as well. This resulted in the net inflow of Rs 1,50,675 crore. Mutual fund investors have put in most of their money in debt schemes during April and May 2013 in anticipation of interest rate cuts by the Reserve Bank of India (RBI). Most of the inflows were into short-term debt schemes and liquid funds. Investors have infused a net amount of Rs 1.44 lakh crore during the period. In April 2013, mutual funds mobilised around Rs 1.08 lakh crore in various schemes. This was the highest net inflow by investors in such schemes in a single month since April 2011, when investors had put in a whopping Rs 1.84 lakh crore. The significant level of fund mobilisation has also helped the total asset under management of mutual funds to grow to Rs 8.9 lakh crore at the end of November, 2013 from Rs 7.01 lakh crore as on March 31, 2013.

Mutual fund assets under management (AUM) rose for the second month in a row, touching almost Rs 900,000 crore level in November 2013. The rise in AUM was primarily due to inflows into liquid/money market funds. According to CRISIL Research, as per the monthly numbers released by the Association of Mutual Funds in India (AMFI), the Indian mutual fund industry’s month-end AUM rose 7% to  a record high of Rs 8,90,000 crore in November 2013. Money market/liquid funds saw net inflows worth Rs 51,400 crore and rise of 30% in AUM due to improved liquidity in the system and cyclical inflows. Liquidity in the banking system improved in November 2013 due to gilt purchases through open market operations (OMOs) and an additional 11-day repo auction by the RBI. Government spending also helped ease liquidity in the system. Improvement in liquidity is reflected from two instances - the decrease in banks’ average borrowing through the central bank’s marginal standing facility (MSF) and the decline in the average net borrowing via the RBI’s liquidity adjustment facility (LAF) - the repo and reverse repo. Cyclical inflows in the category in October and November 2013 helped; these inflows are a result of companies re-investing their short-term investments in the category before they withdraw in December 2013 to meet their advance tax requirements. In October-November 2013, the category saw record inflows of Rs 1,19,000 crore on a consolidated basis. Equity funds’ AUM up for the third consecutive month, rose to Rs 1,75,000 crore marking its third monthly rise in a row. The rise in equity funds’ assets was an outcome of inflows in the category, and rise in the small and mid-cap indices. The category saw inflows of Rs 700 crore in the month (highest in the past five months) compared to outflows of Rs 3500 crore in October 2013.

The mutual fund industry has been facing consistent equity folio closures for the past few months. Mutual funds have lost an estimated over 20 lakh investors, measured in terms of individual accounts or folios, in the first seven months of the current fiscal, mainly due to profit-booking and various merger schemes. According to SEBI data on total investor accounts with 44 fund houses, the number of folios fell to around 4.07 crore at the end of October 2013 from 4.28 crore in the last fiscal (2012-13) — indicating a decline of 20.72 lakh. During April-October, the number of investor folios in equity schemes fell over 25 lakh. The total number of folios were 3.06 crore at the end of October 2013 against 3.32 crore at the end of March 2013.

According to SEBI data, the total number of folios in debt funds rose about 4.22 lakh to 66 lakh at the end of October 2013. Besides, exchange traded funds lost 48,755 folios to nearly seven lakh. Balanced schemes, which invest in equity and debt category, gained 1.06 lakh folios to 27 lakh. As on October 31, 2013, the sector offered 1,335 schemes to investors, of which 344 were equity schemes and 891 were debt-linked schemes. The mutual fund industry lost more than 36 lakh investor accounts in 2012-13. The last financial year also marked the fourth consecutive year of loss of folios by mutual funds. During the preceding three financial years, the mutual fund industry had lost over 15 lakh investor accounts. The mutual fund industry’s average AUMs in November 2013 rose mainly on investments by banks and financial institutions in the liquid funds category, but the continuity of this trend is doubtful due to the volatile nature of such flows. It is too early to cheer rising inflows into equity funds last month, though redemption pressure is receding.

Piquant Parade

 

In a tough year marked by volatility, debt fund managers from Franklin Templeton Mutual Fund and equity wealth managers from ICICI Prudential Mutual Fund outmatched their peers and their respective benchmarks to win the Business Standard Fund Manager of the Year awards. While Sachin Padwal-Desai and Umesh Sharma of Franklin Templeton won the award for the debt category, S Naren and Mittul Kalawadia of ICICI Prudential took the honours in the equity segment.

UTI Mutual Fund bagged the best fund house award at the Outlook Money Awards. Franklin Templeton walked away with the best equity fund house award while Birla Sun Life was awarded the best debt fund house. K N Sivasubramanian of Franklin Templeton won the best equity fund manager award while Amandeep Chopra of UTI bagged the best debt fund manager award.

Pursuant to the transfer of schemes of Daiwa Mutual Fund to SBI Mutual Fund and at the request of Daiwa Mutual Fund, Securities and Exchange Board of India (SEBI), has cancelled the certificate of registration of Daiwa Mutual Fund and has withdrawn the approval granted to Daiwa Asset Management (India) Private Limited, to act as the Asset Management Company to the Mutual Fund in the letter dated November 26, 2013.

The upgraded version of Bombay Stock Exchange’s (BSE) StAR MF platform is expected to be launched on January 14, 2014. BSE is making some changes in the back end of the platform since the settlement would now be between the investor and the exchange. Earlier, the settlement took place between the stock exchange member and the exchange. The old platform will continue to function. Earlier, only members of BSE were permitted to transact through this platform. The high costs associated with taking stock exchange membership deterred distributors, especially IFAs, from joining the platform. BSE is offering this lifetime membership for a non-refundable fee of Rs. 15000. The platform currently does not provide switch facility which means that an investor has to redeem and then reinvest if he/she wishes to switch to another scheme. BSE is working on introducing this facility.  BSE StAR MF platform seems to have gained acceptance among distributors. The exchange has registered 300 distributors after it opened membership for intermediaries in October, 2013. Out of the 300 distributors, 100 are IFAs. National distributors and platforms like IIFL Wealth Management, Aditya Birla Money Mart, iFAST Financial have also taken BSE StAR MF membership.

Fund houses have started organizing investor awareness programs in the districts allotted to them by AMFI under its new initiative called ‘District Adoption Program’ (DAP). The DAP is expected to be formally inaugurated by SEBI chairman U K Sinha. 200 districts across the country will be a part of this program. AMFI is aiming to conduct 5000 Investor Awareness Programs by the end of next year. AMFI has formed a ten-member committee which is headed by Jaideep Bhattacharya, MD & CEO, Baroda Pioneer AMC, to oversee the project. Some AMCs have already started to reach out to investors in their respective districts. Kotak Mutual Fund was allotted Agra, Gwalior, Panipat and Rohtak districts. The fund house has started an outdoor campaign on SIP. It is also planning to reach out to students in schools and colleges in these districts. L&T Mutual Fund has started its investor and distributor education meets in Ambala, Dhanbad, Moradabad, Madurai, and Visakhapatnam. Franklin Templeton has been given 10 districts that include Hubli, Sitapur, Tiruvallur among others. The fund house will start its activities next month. This is the perhaps the first time that the industry is laying greater emphasis on upgrading the skills of distributors along with reaching out to investors. In order to increase the industry’s distribution force, SEBI has asked AMCs to create a new pool of distributors called the new cadre of distributors’. Many AMCs are trying to enroll LIC and PPF agents into the mutual fund distribution fold. “The District Adoption Program (DAP) aims to create employment for nearly 2000 youths in Tier II and III cities, by inducting them as new cadre of Independent Financial Advisors (IFAs) in the mutual fund industry. AMFI is also likely to take its ‘Savings Ka Naya Tareeka’ on radio channels soon. The campaign will be run in multiple languages on FM channels.

…to be continued