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Mumbai: Mutual funds’ assets under management (AUMs) fell by 1.5% to 8.14 trillion in February from a record 8.26 trillion in January, according to data released by the Association of Mutual Funds in India (AMFI) on Wednesday.

The fall in AUMs was attributed to the mark-to-market fall in assets of equity-oriented mutual funds following a 6% decline in the National Stock Exchange’s benchmark CNX Nifty during the month.

“AUM of income funds (mainly short maturity funds) declined owing to tight liquidity conditions prevailing towards the financial year end. The industry saw sharply lower net inflows of 36 billion ( 3,600 crore) in the month vis-à-vis 607 billion in the previous month," credit rating agency Crisil Ltd and AMFI said in a joint press release.

Equity funds posted the biggest decline in AUMs in 15 months to 1.76 trillion, down 7% from January, hurt by mark-to-market losses in their underlying assets. Net outflows from the category slowed to 160 crore in February, the lowest in the past nine months.

India’s key equity indices retreated from their highs in line with global markets on fears that the US central bank may slow or stop its bond buying programme and concerns over political gridlock in Italy and bleak Chinese manufacturing data, coupled with worries over slowing economic growth at home.

Income funds, including long-term and short-term debt funds, fixed-maturity products (FMPs) and ultra short-term debt funds, posted a 1.4% decline in AUMs to 3.93 trillion in February, primarily due to outflows of 5,300 crore.

“Tight liquidity conditions towards the financial year-end saw redemptions from short-maturity debt funds. While FMPs have seen redemptions of 16 billion, these have been balanced by inflows of 21 billion into interval funds," the press release said.

Liquid and gilt funds attracted net inflows. While liquid funds or money market funds drew inflows of 8,600 crore last month, gilt funds registered net inflows for the sixth consecutive month. Inflows into gilt funds were, however, lower at 400 crore compared with 1,100 crore inflows recorded in January.

“The category has become attractive in the recent months on anticipation of easing of interest rates," said the press release by AMFI and Crisil.

The Reserve Bank of India cut its key rates by a quarter of a percentage point on 29 January, the first reduction in nine months.

Bond prices and yields move in opposite directions. “A fall in interest rates will result in a rise in bond prices and positively impact gilt fund NAVs (net asset values, or returns)," the release said.

Gold exchange-traded funds saw outflows for the first time since June 2012 and their AUMs declined by 4% to 11,600 crore.

“The mark-to-market losses (as represented by the CRISIL Gold Index) were around 4% amid a weak global trend for gold following increase in risk appetite," it said.

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