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India Strategy
DMF Flows (Oct-10):
Relentless Outflows from
Equity Funds
Quick Comment: Outflows from equity mutual funds
continued for the fifth consecutive month (at Rs30.5
billion). The outflows in fixed income funds slowed but
remained negative at Rs29 billion. Liquid funds reported
inflows of Rs23 billion whereas income funds recorded
outflows of Rs53 billion. In aggregate, domestic mutual
funds noted outflows of Rs59.4 billion. With the
exception of liquid funds, gold ETFs and gilt funds, all
other funds saw net outflows. The gross activity (sales +
redemption) across funds has touched a five-month high.
By the end of October, total assets under management
for the mutual fund industry stood at US$146 billion, up
2% MoM and 20% below April-10’s high.
Equity fund flows: Since the start of F2011, outflows in
equity funds have totalled Rs184 billion – the highest
ever outflow in any fiscal year since the mutual fund data
has been available. The previous worst ever net
redemption (of Rs32 billion) was in F2002. Notably,
flows in equity funds have been negative in nine out of
the past twelve months. On a 12-month trailing basis,
equity funds have recorded outflows (of Rs199 billion)
compared with inflows of Rs38 billion in the previous
12-month period. By the end of October, equity assets
under management rose to US$50 billion or 3% MoM.
Equity assets account for 3.1% of India’s market cap.
Fixed-income fund flows: In F2011, thus far, fixed
income funds have reported inflows of Rs113 billion
compared to inflows of Rs2.5 trillion during the same
period of F2010. On a 12-month trailing basis, fixed
income funds have recorded outflows of Rs1.6 trillion
compared with inflows of Rs2.7 trillion in the prior
12-months. By the end of October, fixed income assets
stood at US$95.6 billion, up 1.5% MoM.
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