The Hindu Business Line : Pressure easing on mutual funds, with inflows in Nov

Mumbai, Nov. 19 The mutual fund industry, which only a few weeks ago was strapped for funds, appears to be in a turnaround phase and is witnessing inflows.

November has been a better month than October, and mutual fund industry has started to witness inflows, said Mr A.P. Kurian, Chairman, Association of Mutual Funds of India, at a conference here on Wednesday.

Some fund managers confirmed there were inflows, especially in existing schemes.

In fact, collections from UTI Mutual Fund’s new fund ‘Wealth Builder Series II’, which closed today, are expected to be in the region of Rs. 300 crore, said Mr Jaideep Bhattacharya, Chief Marketing Officer at the fund house.

Bank Borrowings

And, despite the impression that mutual funds were desperate to borrow from banks, that situation appears to have passed.

“Currently, only one or two fund houses are borrowing from banks on a daily basis,” said Mr Kurian. On the extension of the liquidity window provided by RBI till March 2009, Mr Kurian said this was only a ‘fall-back’ option for mutual funds.

“We don’t resort to borrowing easily and we do so only in case of severe problems and usually only to meet investor payments,” he said.

It is also a costly option, he added.

Domestic mutual funds’ outstanding borrowings as on Tuesday stood at Rs 6,000 crore, Mr Kurian said.

On the quality of investments of the Fixed Maturity Plans (FMPs), which had grown to be greatly favoured over the last few months, Mr Kurian said: “We are revisiting FMPs and working towards making it an effective investment option.”

MFs are also re-working the load structures of all sorts of funds, indicated Mr Kurian.

The assets under management of the industry stood at Rs 4,31,901 crore as at end-October compared with Rs 5,29,102 crore in end-September, falling 18 per cent, according to AMFI data. The industry lost more than Rs 97,000-crore worth of assets in October.

All the fund houses had reported a decline in their AUMs in October.

In November, the domestic mutual funds have been net sellers of equity for Rs 1,352 crore, and net sellers of debt for Rs 4,265 crore.