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2013: Mutual fund industry's asset base grows by Rs 1 lakh crore

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New Delhi: 

Following a smart turnaround this year with an increase of over Rs 1 lakh crore in its asset base to nearly Rs 9 lakh crore, the mutual fund industry is looking forward to an even better year ahead.

The industry's assets under management hit a record high of Rs 9.58 lakh crore in August this year and have remained near Rs 9 lakh crore as the year draws to a close.

Fund houses are upbeat about an even better performance in 2014 on account of various measures initiated by market regulator Securities and Exchange Board of India (Sebi) as well as plans of individual players to expand the distribution network across the country, particularly to smaller cities.

"2014 would be one of the best year for the mutual fund industry as markets are moving in the upward direction," said Sundeep Sikka, chairman of Association of Mutual Funds in India (AMFI) and chief of leading fund house Reliance MF.

Market participants are optimistic about equity schemes in 2014 on hopes that a stable government - to be set up after the general elections in the first half - will help boost the stock markets. Debt funds are also expected to continue attracting investors in the first half of the New Year.

In 2013, total assets under management (AUM) of all fund houses put together soared by 11 per cent on strong inflows in categories such as bonds and liquid funds, industry estimates show.

This was the second consecutive yearly rise in the industry AUM, after a drop in the assets base for two preceding years.

The total industry AUM stood at Rs 8.08 lakh crore at the end of 2012, while the same was Rs 6.11 lakh crore at 2011-end. It was about Rs 6.26 lakh crore in 2010 and Rs 6.65 lakh crore in 2009.

Mutual funds collect money from investors and later invest the same into various market segments including stocks, IPOs (primary market) and bonds.

Market participants said that with elections on the anvil an element of 'uncertainty' could prevail for the mutual fund industry for the next quarter or so in.

"I am very positive and confident that 2014 would be a very good year for the mutual fund industry," Axis Mutual Fund CEO and managing director Chandresh Nigam said.

PwC India Asset Management Leader Gautam Mehra, however, said, "With elections on the anvil, an element of 'uncertainty' could prevail for the next quarter or so."

During 2013, the performance of the mutual fund industry has, to an extent, mirrored the performance of the Indian economy, the stock markets and foreign institutional investor (FII) investment flows.

This year, not a single new licence was issued and the sector has not witnessed any fresh foreign investment. On the contrary, 2013 was a year of consolidation for the industry.

HDFC MF, with assets of over Rs 1 lakh crore, agreed to buy all eight schemes of Morgan Stanley with combined assets of Rs 3,290 crore. Besides, Daiwa sold its assets to SBI Mutual Fund for an undisclosed amount this year.

For most part of the year, the bond funds had garnered a major share of incremental AUM. However, it is only in the last two months that have witnessed a significant rise in the AUM of the liquid category.

The data also suggests that the rise in the industry AUM is predominantly due to the flows into the liquid category on the back of higher than expected FCNR (foreign currency non-resident) deposits mobilisation by banks and in the absence of a strong credit growth.

Inflows in income and liquid funds have contributed the most to the industry's rising AUM. With inflows of a staggering Rs 1.4 lakh crore, liquid funds AUM surged to Rs 2.46 lakh crore. A similar trend was seen in income funds, where inflows rose to around Rs 23,000 crore taking the assets managed by the fund to Rs 4.31 lakh crore.

However, investors continued to shy away from gold ETFs, with net outflows totalling Rs 1,659 crore. This takes the asset managed by the fund to Rs 9,325 crore. The category has seen outflows in nine out of the 11 months this year.

In August, gold ETF schemes had posted their highest monthly outflow in more than five years (Rs 588 crore) as the rupee's depreciation boosted domestic gold prices, prompting investors to book profits in these funds.

In terms of sectors, export oriented segments, IT and pharma stocks were in the limelight throughout the year on account of weak domestic currency and improving global growth. Besides, industry continues to be bullish on these sectors for the next year as well.

About the next year, HSBC Global Asset Management chief executive Puneet Chaddha said, "We believe that 2014 should see more of the same as in 2013. Debt funds could continue to attract retail investors towards the first half of the year with some allocation to hybrid products like MIPs and Dynamic funds."

"Having said that, it could be a good year for equities as by the end of 2014 we would have a government that has been newly formed and the US taper could have become stale news (or 'digested' in market parlance)."

Going forward, Sebi could adopt a stricter approach towards 'non-serious' asset managers. An advisory committee formed to review the net worth requirement for Asset Management Companies has suggested an upward revision in the minimum net worth required for an AMC, Mr Mehra said.
 



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