Investments in mutual fund (MF) schemes saw a sharp decline of 68% in November to around Rs45,100 crore over the previous month. Though the average assets under management (AUM) currently stands at Rs8.1 trillion, which is about 6% up from October last year, the outflow from equity schemes continued for the fourth consecutive month, owing to low sales as a result of lower distributor interest in the equity schemes, following the ban on the entry load, lack of adequate new fund offerings (NFOs) and profit booking.
As per the Securities and Exchange Board of India (Sebi), asset management companies (AMCs) would now have to ensure they get all the required investor documents from the distributors. Further, Sebi has also asked the AMCs not to demand a no-objection certificate for investors wanting to change their mutual fund (MF) distributors. Sebi mentioned this as an inconsistent practice causing hardships to investors.
Buying and selling MF units on the recently opened trading facility on stock exchanges will not be tax-free. Capital gains in respect of transfer of units of “equity-oriented mutual fund” held for a period of more than 12 months (long term) would not be liable to income-tax, provided the transfer of units is subject to the securities transaction tax. If the units are held for 12 months or less (short term), the same would be liable to tax at the rate of 15% plus cess.
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The Bombay Stock Exchange recorded 251 orders worth Rs8.4 crore on the first day of commencement of its online MF platform. The exchange has tied up with seven fund houses for this MF platform.
The total AUM of equity MFs in November stood at Rs213,258 crore, 4.6% higher than that in October. After adjusting for the net inflows/outflows, the growth stood at 5%, which was lower than the Sensex growth of 6.5% during the same period. Fund managers made gross sales worth Rs15,447.2 crore and remained net sellers to the tune of Rs695.3 crore during the month.
Equity MFs registered a net outflow of Rs814 crore in November compared with an outflow of Rs2,390 crore in the previous month. The improvement in the overall fund flows was largely due to a 20.5% decrease in the total redemption volumes and a rise in money flowing through NFOs with a corpus of Rs229 crore (compared with none in October).
Domestic equity-oriented MFs are sitting on Rs12,596 crore, waiting to be deployed in the market. The improving market sentiment has prompted mutual funds to revert to a strong investment mode by decreasing their cash holdings (decline of 11.8% compared with the previous month).
Keeping in line with the upward trend in the equity markets, all sector funds delivered positive returns in November. Automobile funds gave the highest returns in November, followed by pharmaceutical funds and banking funds.
Auto, pharma and information technology sector funds outperformed the Sensex, whereas fast-moving consumer goods (FMCG) funds were the under-performers. Banking funds performed in line with the Sensex. During the month, MFs bought stocks in auto, metals and pharma sectors and slashed their exposure to power, oil and gas and FMCG sectors.
Graphics by Ahmed Raza Khan / Mint