The month-end assets under management (AUM) of the Indian mutual fund industry (as on December 2011) has witnessed a decline of 2.38% to Rs6.11 trillion (as per monthly data released by Association of Mutual Funds in India) as compared with last year’s (December 2010) figure of Rs6.26 trillion. The month-end AUM stood at its peak in April 2011, which rose by 32.61% at Rs7.9 trillion on account of eased liquidity conditions in the market, which paved the way for investors to park their money in liquid and income schemes.
Turbulence in the equity market over the course of the financial year subdued the investors’ sentiment that resulted in redemption pressure. The key benchmark indices, BSE Sensex and S&P Nifty fell by almost 25% in the calendar year 2011. Factors such as tight liquidity condition, advance tax outflows during the year also affected the AUM.
Debt funds could witness enhanced interest due to expectation of rate cuts over the short term, which will result in better risk-adjusted returns. The tight government fiscals could, however, limit the upside over the short term. There is a distinct possibility of fixed maturity plans also remaining attractive in the short term. The recent ruling of reducing the marked-to-market window from 90 days to 60 days and that all securities in the liquid schemes be valued could ensure that investors with a longer-term investment horizon stand to benefit.
Also See | Performance snapshot (Graphic)
Gold exchange-traded funds may witness slight loss of steam due to lower likelihood of 2012 being a repeat of 2011 in terms of spectacular returns that gold provided.
Edited excerpts from a report by Icra Online Ltd. Your comments are welcome at mintmoney@livemint.com.
