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Fund assets wilt by Rs 7,500 crore in black September

A rebound unlikely in near future as cautious investors stay on sidelines; UTI's corpus

It was a black September for the Indian fund industry as well. The WTC-triggered tremors wiped off assets of over Rs 7,500 crore as both equity and debt markets withered under panic selling. The cumulative asset base on September 30 stood at Rs 91, 811 crore, sharply down from Rs 99,336 crore in the previous month and a whopping Rs 21,000 crore lower than its peak of 1.13 lakh crore in March 2000. Unit Trust of India's corpus fell below Rs 50,000 crore for the first time as the bearish markets eroded assets close to Rs 4,000 crore. However, the shrinking fund behemoth still commands a 53% share of the Indian fund market.

All categories, barring cash funds, lost money as investors fled to the safety of short-term instruments to avoid the gyrating markets. While cash funds mopped up Rs 755 crore, growth funds also sprang a positive surprise with a net inflow of Rs 58 crore. However, the sharply depleted NAVs still pulled down equity funds, which shrunk by Rs 1457 crore.

Debt funds also witnessed a net outflow for the first time in the current financial year as the usually placid bond markets turned volatile. The net outflow was a whopping Rs 3045 crore during September, a drastic climbdown from June's record investments of Rs 4,800 crore. Much of the redemption is attributed to short-term investors, who had parked investments in bond and gilt funds on the back of a positive interest rate out look. Thus, these investors were the first to press the panic button and moved to cash funds with the absence of exit load catalysing redemption in some bond funds.

While equity markets have staged a partial recovery in the current month, bond markets have also stabilised with yields near historic lows. However, it is unlikely that the combined asset base of the fund industry will rebound to its previous level in a hurry. While some switchovers have taken place back to bond funds, fresh investments have now slowed down as cautious investors grapple with uncertainty. In fact, some money is flowing to fixed maturity plans since investments there are locked at a fixed yield and provide an implicit assured return. On the other hand, equity funds continue to be a victim of investors' apathy after sharp losses, notwithstanding the trickle of net investments last month.

It is surely an arduous journey for the Indian fund industry in the coming days as it faces disenchanted investors and an uncertain market!