MFs faced redemptions of more than Rs. 30,000 crore in liquid schemes as large investors withdrew to pay advance tax
Mumbai: More than 30 per cent of the investments in liquid and money market funds were withdrawn for payment of third quarter advance tax this week.
The liquid and money market schemes had about 15 per cent or Rs 99,190 crore of the total industry AUM at the end of November 2010. Fund managers estimate that about Rs 30,000 crore was withdrawn on or before December 15, 2010 to pay advance tax.
Advance tax payment in the third quarter was up around 18 per cent from a year earlier. It was 20 per cent higher than in the preceding quarter, media reports said quoting S S N Moorthy, Chairman, Central Board of Direct Taxes (CBDT).
Mutual fund officials said fund houses had maintained enough liquidity to meet the quarterly redemption demand for payment of advance tax. They said the withdrawals were in line with what the industry had expected and hence, the event passed off smoothly.
“Redemptions have not been that high this time. Generally funds account for such situations and keep some cash as a buffer,” said Arvind Chari, Fund Manager, and Fixed Income at Quantum Mutual Fund.
“A lot of money came in the first week of November. The redemptions started in liquid and liquid plus schemes from early December,” said Ganthi Murthy, Head of Fixed Income at Peerless MF.
