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Mobilisation back in the black but can it match 1999?

Aabhas Pandya

The mobilisation drive of the fund industry is back on track. September transpired to be the month of reverses, with the fund industry witnessing a net outflow for the first time in the current calendar. After this the mutual funds have mopped up a net of Rs 14 billion in October.

The fresh investments is partially attributed to the initial primary offers under the Asset Allocation Series from IDBI Mutual Fund, which collectively mobilised Rs 6 billion. However, with October being one of the worst months for equities, the total assets under management for the fund industry shrunk further to Rs 968.36 billion.

While the industry is back in the reckoning after a brief aberration, everything is not hunky dory yet, with bearish sentiment hurting returns from both debt and equity funds. This has severely impacted the inflows so far in the current fiscal (2000-2001). Thus, unlike last fiscal, when the fund industry was the toast of financial markets, collections have clearly received a setback this year.

According to the Securities and Exchange Board of India, mutual funds had garnered a net investment of nearly Rs 190 billion for the year ended March 31, 2000. However, the fund industry has only accumulated a net of Rs 61.67 billion till October, which gives a year-end figure of Rs 105.70 billion on a rough estimate and thus, could be lower by as much as 44 per cent on a Y-o-Y basis. Nonetheless, with five months to go, mutual funds could still turn a few surprises.

In 1999, mutual funds had received investments in hordes from corporates, given their newfound tax-free status. The money had largely flown in from IPOs of software companies and the acquisition mania in the Indian corporate sector, with promoters of smaller firms selling out to larger companies. Besides, there was a string of mutual fund IPOs, like those of balanced and technology funds, which mobilised significant amounts.

However, the net collection of around Rs 60 billion in the current fiscal has been largely driven by new fund and AMC launches. The 22 mutual fund IPOs have garnered nearly 50 per cent or Rs 30.66 billion between them with most of the money flowing into debt funds.

Among the big guzzlers, the two monthly income plans from UTI and the new AMCs of HDFC and ANZ have gobbled over Rs 20 billion. That apart, UTI's US '64 has witnessed a net inflow of Rs 7.70 billion since July 1, 2000 while technology funds, despite their bruised NAVs, have seen a net inflow of another Rs 1 billion.

With the IPO activity in deep slumber and even debt funds turning volatile, cash-rich corporates and high networth individuals have been parking money with liquid funds. Besides, there has been a lateral shift from equity and bond funds to short-term debt funds. No wonder, most liquid funds have seen a dramatic increase in their assets under management.

Source: Value Research

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