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March 11, 2019

Monthly Update

Mutual fund AUM, February 2019

Mutual fund assets declined a tad in February 2019


The domestic mutual fund industry’s assets under management (AUM) declined 0.89% to Rs 23.16 trillion in February 2019 led by outflows from income and liquid funds, even as equity funds saw intermittent inflows.


Interest in equity funds lingered


Marking the 35th consecutive month of inflows into the category, equity funds witnessed inflows of Rs 46.40 billion in February. The inflows in equity funds have, however, been sporadic in recent months due to volatility in the underlying market. The previous two months reported inflows of Rs 50.82 billion and Rs 44.42 billion, respectively - a far cry from over Rs 100 billion of average monthly inflows in the previous 32 months. Weak inflows coupled with mark-to-market (MTM) losses led to the category’s AUM declining by Rs 9.65 billion, or 0.12%, to Rs 8.29 trillion. Nifty 50 and Nifty 500, representing the underlying equity assets, lost 0.4% and 0.5%, respectively, in February.


Outflows in balanced funds continued in February


Waning interest in equity funds can be seen in the other equity-oriented category in the industry - balanced funds. The category witnessed outflows for the second straight month, to the tune of Rs 10.77 billion in February against January’s outflows of Rs 9.52 billion. Net outflows and MTM losses led to erosion of the category’s asset base by Rs 28.25 billion, or 1.61%, to Rs 1.73 trillion.


Debt funds recorded sharpest outflows since November 2018


Investors in debt funds seem to be unnerved by the debt downgrade and credit liquidity crisis that ailed the mutual fund industry in the latter half of 2018, as seen by outflows in February. Debt funds (excluding liquid and gilt funds) witnessed outflows worth Rs 42.14 billion, the sharpest monthly outflows seen since November 2018 which had recorded outflows amounting to Rs 65.18 billion. Despite the outflows, debt funds recorded a lower AUM decline of Rs 17.14 billion, or 0.25%, to Rs 6.96 trillion, helped by MTM gains.


Gilt funds witnessed strongest outflows since October 2018


Gilt funds witnessed outflows of Rs 1.49 billion in February, higher than the outflows of Rs 0.89 billion in January, marking the sharpest outflows recorded since October 2018 (Rs 2.91 billion). As a result, the category’s assets declined by Rs 1.25 billion, or 1.55%, to Rs 79.34 billion in February. Yield of the 10-year benchmark 7.17% 2028 paper ended at 7.59% on February 28, 2019, compared with 7.48% on January 31, 2019, as sentiment was dented by a rebound in crude oil prices and higher market borrowing announced by the Centre in the Interim Union Budget.


Liquid funds saw outflows, reversing the trend in January


Liquid funds saw outflows totalling Rs 245.09 billion as against inflows of Rs 586.37 billion in January. Resultantly, the category’s assets declined by Rs 211.76 billion, or 4.16%, to Rs 4.88 trillion in February.


Gold ETFs’ assets rose marginally despite outflows


Gold exchange-traded funds’ (ETFs) assets increased by Rs 50 million, or 0.11%, to Rs 47.37 billion despite outflows of Rs 140 million in January. Asset growth was led by MTM gains; underlying asset prices represented by CRISIL Gold Index, rose 0.53% in the month.