Mutual funds’ assets under management decline despite record inflow into equity

The assets under mutual fund management have fallen for the first time in several months to ₹19.04 lakh crore in May from ₹19.26 lakh crore recorded in April, largely due to outflow of ₹64,692 crore from liquid schemes.

The fall in AUM comes even as net inflow into equity funds hit a two-year high of ₹10,739 crore in May, an increase of 14 per cent from April. This is the highest net inflow in the equity MF category since June 2015 and marks the 14th straight month of net inflows, according to a statement issued by rating agency ICRA.

Besides the rally in the capital market, the consistent inflow through the Systematic Investment Plan route helped shore up equity inflows. Money market-focussed mutual fund schemes are used by corporates to park surplus cash and such high redemptions are normal in the beginning of the financial year, said ICRA.

Income, equity and balanced funds saw strong net inflow of ₹5,124 crore, ₹10,208 crore and ₹7,663 crore, respectively. Investors are showing confidence in the market as evident from sustained retail participation.

The total folio count as of May-end was up 2 per cent at 5.72 crore, according to SEBI data. The growth came primarily on the back of 7.39 lakh new folios added to the equity category (including ELSS) and 1.67 lakh new folios to balanced funds.

It is interesting to note that 0.88 lakh new folios were added to the ELSS category in May, suggesting investors are taking their tax planning seriously and not putting the ELSS category for end of “tax season” in March.

The only categories to witness fall in folio count were exchange-traded funds and fund of funds investing overseas. The drop in count was 2,363 and 2,070.

In the last 12 months, assets from B15 towns (beyond top 15 cities) have grown 47 per cent due to investor-friendly initiatives taken by the regulators and campaigns by MFs. B15 assets grew ₹1.09 lakh crore to ₹3.41 lakh crore in the last one year.

Currently, B15 towns account for 17 per cent of the total assets of the MF industry. However, the share of direct plans in B15 towns is only 24 per cent as against 45 per cent in T15 (top 15) cities.

Liquid funds gained traction with retail investors of MF houses promoting them vigorously. Earlier, liquid funds were considered a category for corporates and high networth individuals to park their surplus cash.

In the last five financial years, the retail AUM in liquid funds has increased by close to seven times while its folio count has grown four-fold.

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