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Mutual Funds Register Strong Sales in 2000

Despite poor returns and heavy losses in 2000, funds ended last year with gross sales of Rs 92,000 crore. But, this is just one part of the story

Every dark cloud has a silver lining! The year gone-by was not only about ravaged NAVs, poor returns, depleted assets and negative reports for Indian mutual funds. The fund industry has a reason to cheer since sales rose a steep 55% or over 33,000 crore to Rs 93,000 crore for the year ended March 31, 2001. The figures are also impressive, considering that it does not include the sizeable collections under technology funds, most of which closed their IPOs in March 2000. While new fund launches mobilised Rs 3400 crore during the year, the rest flowed in existing schemes.

Yet, fund houses do not exactly deserve applaud for managing such high sale figures amidst the rough and tumble last year. A part of the sales came from aggressive dividend stripping by some AMCs, leading to a high turnover in their funds. With massive inflows and outflows in just a couple of days, it inflated both investment and redemption numbers. No wonder, redemption was also heavy with a cumulative outflow in excess of Rs 83,800 crore, which translates into a startling 90% of the total inflows for the year.

Still Going Strong
  AUMs (Rs Cr.)  
  1999-2000  2000-2001
Inflows 59739.00 92957.00
Outflows 41204.00 83829.00

This also brought down the net inflows for the year by over 50% to only Rs 9128 crore against Rs 18,500 crore in 2000. Dividend stripping apart, the large outflows is attributed to redemption of as many as 21 closed-end funds (minus their options) with a cumulative unit capital of over Rs 2,700 crore.

Most of these funds were assured return schemes like LIC MF's Dhanvarsha, UTI's Institutional Fund and monthly income plans and BOI AMC's Double Square Plus. Thus, all the funds were redeemed at least on par. Based on a conservative average net asset value of Rs 13, the outflows were in excess of Rs 3000 crore. On the other hand, a mere six funds were redeemed for the year ended March 31, 2000.

The worst hit last year was mutual fund behemoth, Unit Trust of India whose asset base dwindled by Rs 18,500 crore from a formidable Rs 76,000 crore to under Rs 60,000 crore. Despite the aggressive selling of US 64, the Trust ended the year with net inflows of only Rs 323 crore; hit due to redemption of some of its big-ticket funds and meltdown on the bourses. In the process, UTI also pulled down the bulk of the assets under management for the entire fund industry, which fell by over Rs 22,000 crore from Rs 1.13 lakh crore in 1999-2000 to 90,500 crore in 2000-2001.

The meltdown in equities has also boosted the relatively placid debt category, which now makes up for nearly two-thirds of the total assets under the fund industry. On the other hand, the corpus under equities has shrunk from over Rs 33,000 crore in 2000 to just Rs 16,000 last year.

Despite a bleak year when most equity funds dropped like nine pins and debt funds were also volatile, investors have largely kept their faith going in the fund industry. It is now up to the fund industry in the new-year to restore the trust of scores of investors!

Income Funds on Top
   AUMs (Rs Cr.)  
  1999-2000  2000-2001
Income 55308.00 52601.00
Growth 16006.00 33647.00
Balanced 19273.00 26757.00