Mutual Funds lost Rs. 50,067 crore in July 2013

 After marginal inflows in June, 2013 equity mutual funds faced a net outflow in July, 2013 on account of poor fresh inflows and higher redemptions

July was again a dreadful month for the Indian mutual fund industry.  It witnessed a total net outflow of Rs. 50,067 crore for the July. The sector faced heavy redemption pressures in all categories of schemes.

Much of this happened due to heavy redemptions in liquid schemes, because of central banks’ policies tightening liquidity.  Liquid schemes suffered a total net outflow of Rs. 45,296 crore.

Income schemes too, faced higher redemptions, leading to a net outflow of Rs. 2,657 crore.

Comparatively, outflows from equity mutual fund schemes were much lower.  But,  since the beginning of FY13-14,  equity mutual fund schemes have lost assets over Rs. 3,000 crore in net outflows.

Sales of equity mutual fund schemes declined to the lowest in the past 8 months. The quantum of sales in July 2013 declined by 11 % to Rs. 2,945 crore, compared to Rs. 3,311 crore for the same month last year.

Redemptions too were higher at Rs. 4,772 crore, up 12 %, from Rs. 4,260 registered in July 2012.

About 12 % of the inflows into equity schemes come from direct plans. Compared to the total inflows from direct plans across all categories, this translates to just  2 % of the total inflows from direct plans.

The largest inflow through direct plans is in the liquid fund category, much of which is from corporate investors.

According to a CRISIL report, direct plans constitute 25 % of the total industry AUM against 15 % in the previous quarter. Debt-oriented mutual funds constitute 98 % of the total AUM under direct plans.

Since April 2013, there have been just 3 equity new fund offers that have been launched. While fund houses are filing offer documents with the regulator to launch new schemes, very few of these are actually being launched. As many as 14 offer documents of equity oriented schemes have been filed, but just two of these schemes have been launched so far. The volatile market conditions & poor response to equity schemes from retail investors may have caused fund houses to put off the launch of the schemes.

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