CRISIL FundMonitor, CRISIL’s monthly review of the mutual fund industry points out that debt funds provided investors the highest returns in November 2008. Within the debt fund category, the monthly returns of gilt funds were the highest (3.07 per cent), followed by long-term bond funds, short term bond funds and liquid funds in that order. Returns from equity funds were negative, as the downtrend in equity markets continued.
Summarising the trends in the industry, Krishnan Sitaraman, Head, CRISIL FundServices explained : “After two consecutive months of sharp declines, the month end industry AUM finally showed an increase to Rs. 4.05 trillion from Rs.3.95 trillion, due to significant inflows in the second fortnight of the month as liquidity in the economy improved and investors once again turned to mutual funds. Most of the accretions flowed to open-ended income funds and liquid funds.”
In November 2008, open ended income funds and liquid funds were the key beneficiaries with the former seeing net inflows of almost Rs.190 billion while close ended income schemes (largely Fixed Maturity Plans or FMPs) saw net outflows of a similar magnitude. AUMs of liquid funds increased by Rs.175 billion, a growth of nearly 25 per cent over the October-end AUM. The decline in equity AUM of around Rs.70 billion was largely on account of mark-to-market losses. The share of debt funds AUMs in the Indian mutual fund universe thus continued to rise in 2008 from 61 per cent in January 2008 to 71 per cent in November 2008.
Of the 35 mutual fund houses analysed as part of the CRISIL FundMonitor, only two saw a growth in average AUM in November 2008 - Tata Mutual Fund registered a little over 3 per cent growth in its average AUM followed by UTI Mutual Fund which saw a very marginal increase in its average AUM to Rs.384 billion in November from Rs.383 billion in October. Reliance Mutual Fund, ICICI Prudential Mutual Fund and HDFC Mutual Fund saw a decline in the range of 3-6 per cent while smaller fund houses like Taurus Mutual Fund (34 per cent), Edelweiss Mutual Fund (28 per cent) and Mirae Asset Mutual Fund (69 per cent) registered much sharper declines. Reliance Mutual Fund continued to be largest fund house with an average asset base of Rs.678 billion in November 2008, though down by nearly 5 per cent from the previous month.
On an overall basis, the environment of lower interest rates, lower inflation and the beginning of a slight easing in liquidity conditions, facilitated the improved performance of debt funds. Given falling interest rates, funds which had taken a higher duration call out-performed. This is because of the direct relationship between debt fund returns and duration in a declining interest rate scenario, i.e. when interest rates decline, funds which are invested in longer duration securities out-perform as such securities appreciate more in an environment of declining interest rates.
Summarising the trends in the industry, Krishnan Sitaraman, Head, CRISIL FundServices explained : “After two consecutive months of sharp declines, the month end industry AUM finally showed an increase to Rs. 4.05 trillion from Rs.3.95 trillion, due to significant inflows in the second fortnight of the month as liquidity in the economy improved and investors once again turned to mutual funds. Most of the accretions flowed to open-ended income funds and liquid funds.”
In November 2008, open ended income funds and liquid funds were the key beneficiaries with the former seeing net inflows of almost Rs.190 billion while close ended income schemes (largely Fixed Maturity Plans or FMPs) saw net outflows of a similar magnitude. AUMs of liquid funds increased by Rs.175 billion, a growth of nearly 25 per cent over the October-end AUM. The decline in equity AUM of around Rs.70 billion was largely on account of mark-to-market losses. The share of debt funds AUMs in the Indian mutual fund universe thus continued to rise in 2008 from 61 per cent in January 2008 to 71 per cent in November 2008.
Of the 35 mutual fund houses analysed as part of the CRISIL FundMonitor, only two saw a growth in average AUM in November 2008 - Tata Mutual Fund registered a little over 3 per cent growth in its average AUM followed by UTI Mutual Fund which saw a very marginal increase in its average AUM to Rs.384 billion in November from Rs.383 billion in October. Reliance Mutual Fund, ICICI Prudential Mutual Fund and HDFC Mutual Fund saw a decline in the range of 3-6 per cent while smaller fund houses like Taurus Mutual Fund (34 per cent), Edelweiss Mutual Fund (28 per cent) and Mirae Asset Mutual Fund (69 per cent) registered much sharper declines. Reliance Mutual Fund continued to be largest fund house with an average asset base of Rs.678 billion in November 2008, though down by nearly 5 per cent from the previous month.
On an overall basis, the environment of lower interest rates, lower inflation and the beginning of a slight easing in liquidity conditions, facilitated the improved performance of debt funds. Given falling interest rates, funds which had taken a higher duration call out-performed. This is because of the direct relationship between debt fund returns and duration in a declining interest rate scenario, i.e. when interest rates decline, funds which are invested in longer duration securities out-perform as such securities appreciate more in an environment of declining interest rates.
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