Mutual funds AUM dataThe last month of 2018 calendar year did not turn out to be good for the Indian mutual fund industry from a business perspective. Assets under management dropped to Rs 22.85 lakh crore in December from Rs 24.03 lakh crore in November, a fall of nearly 5%. This was largely on the back of Rs 1.36 lakh crore outflows. The outflows were huge in liquid funds, but that is not a cause for worry as this trend is seen every time a quarter ends when corporates pull out money from liquid funds to show cash on their books. Equity funds, however, continued to see pressure in terms of net flows amid uneasiness in the minds of investors ahead of 2019 Lok Sabha election. Read on to know more.

AUM picture

The MF industry’s assets under management (AUM) fell 5% month on month in December. However, on a yearly basis, there is 7.4% AUM growth, as on December 2017 the AUM for the industry was at Rs 21.86 lakh crore. The year on year AUM growth has happened despite the calendar year 2018 being extremely volatile with a sharp up and down moves with overall returns for 2018 in single digits. Compare that to 2017 when there was a smooth one-way rally, and naturally, there was 30% AUM growth in that period.

Do remember the largest chunks of the AUM come from liquid, income and equity funds. The other categories, while being important, do not contribute much muscle for fund-houses.

Equity funds

For investors, equity funds are a big draw. The category had bittersweet moments in December 2018. Markets were generally flattish in December, but some investors seemed continued yo take out money. At a net inflow level, equity funds (excluding arbitrage, balanced, ELSS and other ETFs) saw Rs 5,765 crore. This is a 24% drop compared to November 2018 and quite a bigger decline compared to December 2017 level. Equity fund net inflow numbers have declined for the third straight month. They are also at their lowest monthly level since March 2018 (Rs 2,954 crore). The slowdown could also be on account of the year-end holidays where the distribution tends to wind down a bit. For 2018 as a whole, equity funds have seen net inflows worth Rs 1.12 lakh crore compared to Rs 1.13 lakh crore in the calendar year 2017.

However, equity funds continued to see Systematic Investment Plans (SIPs) bringing in money. In fact, the SIP story seems to be holding up the equity funds. December 2018 saw over Rs 8,000 crore coming in through SIPs, and bulk would be for equity funds. N S Venkatesh, CEO, AMFI said: “Continued upward trend in retail AUM and monthly SIP contributions are the bright spots this month and reflect strong adherence to disciplined investment behaviour from the retail investor fraternity, in spite of the market volatility.”

There are over 2.5 crore SIP accounts. For year 2018, SIPs have brought in about Rs 89,000 crore. This is around 50% growth over Rs 59,682 crore brought by SIPs in 2017. At the end of December 2018, equity funds manage Rs 6.98 lakh crore of investor assets or roughly 31% of MF industry money. This is largely unchanged from Rs 6.9 lakh crore investor assets managed in December 2017.

Take a look at the net inflow/outflow equity funds over the last 12 months.

Equity funds inflows in 2018

Month Net inflows (Rs Cr) Month on month change %
Dec-2018 5765 -24
Nov-2018 7569 -34
Oct-2018 11422 12
Sep-2018 10237 32
Aug-2018 7734 -9
Jul-2018 8512 -3
Jun-2018 8794 -16
May-2018 10444 -3
Apr-2018 * 10724 263
Mar-2018 2954 -80
Feb-2018 14683 10
Jan-2018 13404 -10
Dec-2017 14921 -24
Source: AMFI * From April, numbers exclude arbitrage funds data

Other ETFs

The other ETFs category is predominantly equity-fund oriented. This space gets almost constant inflows from EPFO which invests in index ETFs. The other ETFs category saw Rs 10,878 crore worth net inflows in December 2018, helping the assets of this space top Rs 1.07 lakh crore. Interestingly, in November 2018 the category saw net inflows of Rs 1,634 crore.

Vishal Kapoor, CEO, IDFC AMC said: “When you look at the equity flows, it is important to point out that net inflows in the ETF category where almost Rs 11,000 crore of net inflows happened.”

For 2018, other ETFs category saw net inflows of Rs 30,657 crore compared to Rs 31,434 crore for 2017.

Gold ETFs continued to see net outflows in December 2018. The precious metal ETFs have seen net outflows of Rs 571 crore in 2018, slower than Rs 730 crore net outflows in 2017.

The ELSS-equity category saw Rs 841 crore net inflows, as investors started planning for their financial year tax-saving. For full-year 2018, ELSS category saw net inflows of Rs 14,885 crore, about 23% higher than Rs 12,111 crore garnered in 2017. Most of the business picks up in the January-March quarter when the focus shifts to tax saving ELSS funds, says Kapoor.

Year in Review

Fund category 2018 net inflows/outflows (Rs) * 2017 net inflows/outflows (Rs) 2018 AUM (Rs) 2017 AUM (Rs)
Equity funds 1.12 lakh crore 1.13 lakh crore 6.98 lakh crore 6.9 lakh crore
Other ETFs 30657 crore 31434 crore 1.07 lakh crore 70353 crore
Gold ETFs -571 crore -730 crore 4571 crore 4855 crore
ELSS 14885 crore 12111 crore 88152 crore 80981 crore
Liquid/money market funds 1.36 lakh crore -42111 crore 4.48 lakh crore 2.86 lakh crore
Income funds -1.66 lakh crore 10743 crore 6.91 lakh crore 8.08 lakh crore
* From April, numbers exclude arbitrage funds data

Fixed income funds

The fixed income category continued to see volatile flows. December being a quarter-ending month, it saw a lot of money that came in October and November going out. According to AMFI, in December 2018 Rs 1.48 lakh crore worth net outflows were registered in liquid/money market funds, bringing down the AUM of the category to Rs 4.48 lakh crore or 20% of industry money. Liquid funds have grown in stature, thanks to individuals using this product more in 2018. In 2017, liquid fund AUM stood at Rs 2.86 lakh crore or 14% of industry AUM.

Usually, the money that goes out in March, June, September, and December comes back in the succeeding months. The fund industry expects to see liquid funds coming back to the stable in January 2019. For the 2018 calendar year, liquid/money market funds saw total net inflows of Rs 1.36 lakh crore compared to net outflows worth Rs 42,111 crore in 2017.

Income funds too saw net outflows in December 2018, but the figure of Rs 3,407 crore paled in front of the exodus in liquid funds. Income funds account for Rs 6.91 lakh crore or 30% of the money in the MF industry at the end of 2018. This is lower than Rs 8.08 lakh crore or 38% of industry money at the end of 2017. Coming back to inflow picture in income funds, this category saw huge outflows to the tune of Rs 1.66 lakh crore in the whole of 2018 compared to net inflows of Rs 10,743 crore. Clearly, income funds have lost out to investor interest in liquid/money market funds in 2018.

Do remember fund-houses make a lot more profit from equity schemes than debt schemes. Typically, large fund-houses earn from Rs 1 crore equity AUM what Rs 6-7 crore of liquid funds AUM give.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on