Mutual fund assets drop 13 per cent in March, lowest since June 2009

Do not blame volatile markets every time you see mutual fund assets under management, or AUM, plunge miserably. According to the Association of Mutual Funds in India, or AMFI, the mutual fund industry's month-end AUM has plunged by Rs 88,021 crore, down 13 per cent from Rs 6,75,238 crore in February 2012, to Rs 5,87,217 crore in March 2012.

Apart from registering the lowest AUM since June 2009, March's month-on-month decline in assets was the worst in the 12 months gone by.

For an industry where corporate investors - as per AMFI data for September 2011 - account for less than one per cent of the mutual fund investor population but their share of AUM is 46.7 per cent such anomalies are bound to prevail.

Quarter-end outflows from liquid funds are a regular feature in the industry as corporates and banks withdraw their short-term investments to meet their advance tax and capital adequacy requirements respectively, says a note from CRISIL Research.



Liquid and money market funds, where corporate investment accounted for 75 per cent of the category's total investments in September 2011, saw a net outflow of Rs 76,537 crore in March this year. The category alone accounted for little over 91 per cent of the total outflow during the month.

With a net outflow of Rs 7,654 crore, income funds witnessed outflows for the fifth consecutive month. Experts believe that fifth consecutive outflows are a possible reflection of investors' shift in preference to long-term debt funds as domestic interest rates are showing signs of peaking.

Equity AUM at Rs 1,82,076 crore registered a marginal decline of 1.96 per cent in March, from Rs 1,85,722 crore in the previous month, which mapped a 1.7 per cent decline in the benchmark S&P CNX Nifty after recording gains in the previous two months.

The domestic equity markets fell primarily on the back of disappointing budget which brought in hike in service tax and excise duty, and no concrete measures to curtail burgeoning fiscal deficit in the economy.

On the international side, weaker cues from rising crude oil prices to uncertainty over Greece's bailout and weak growth numbers in China were the reasons which kept the domestic equity market suppressed.

The March effect owing to higher corporate investments is, however, not a worrying trend given that industry AUM has bounced back by an average 26 per cent in the consecutive month over the last five years.

But among the top five mutual fund houses of the country, at Rs 78,112 crore, Reliance Mutual Fund has witnessed a 5.1 fall in its average AUM for the quarter ended March 2012 compared to Rs 82,306 crore for the quarter ended December 2011.

Asset Base					Top 5 AMCs
Year	AUM (Rs crore)		Percentage Change		AMC	Average AUM (Rs crore)		Percentage Change
	March	April			AMC	Oct-Dec 2011	Jan - Mar 2012
2007	326388	350467	7.4		HDFC	88628	89879	1.41
2008	505152	595010	17.8		Reliance	82306	78112	-5.10
2009	417300	593516	42.2		ICICI Prudential	69368	68718	-0.94
2010	613979	808541	31.7		Birla Sun Life	60377	61142	1.27
2011	592250	785374	32.6		UTI	57817	58922	1.91
Source: AMFI, BT Research