MFs face pressures as liquid funds flee for deposits

With interest rates rising, the mutual fund industry witnessed redemption pressures to yield more than Rs 15,000 crore in the month of December alone, particularly from liquid funds, as investors shifted funds to higher-yielding debt or deposits.

Among the big ones, barring Reliance and HDFC Mutual Fund, most of the funds witnessed huge redemptions.

As a result, the assets under management (AUM) of the UTI Mutual Fund, the nation's largest, witnessed a decline of Rs 3,514 crore to Rs 38,109 crore at the end of December from Rs 41,623 crore a month ago.

"This is the result of high interest rates and the quarter-ending phenomenon," said UTI Mutual Fund's chief investment officer AK Sridhar.

In fact, Prudential ICICI Mutual Fund slipped to the number three position as its AUM fell to Rs 33,305 crore from Rs 35,323 crore, down Rs 1,928 crore over the month.

However, Reliance Mutual, which mopped up over Rs 2,000 crore under its new scheme, Reliance Long Term Equity Fund, witnessed an increased in its AUM to Rs 36,928 crore from Rs 34,637 crore.

"In the current environment, fixed deposits are giving an 8.5 per cent return. People are looking at investing in fixed deposits rather than liquid funds," said Vikran Gagrani, CEO of Reliance Mutual.

The AUM of HDFC Mutual Funds has increased marginally by Rs 80 crore to Rs 29,635 crore.

At the end of November, the mutual fund industry was managing assets worth Rs 3,42,113 crore, according to industry analyser Value Research. Of this, AUM under equity funds were Rs 1,20,000 crore, and Rs 18,000 crore were in balanced funds. The AUM under pure debt funds was only Rs 18,000 crore, while liquid funds accounted for more than Rs 185,000 crore.

Email Arun Kumar: arunkumar@hindustantimes.com