Inflows in debt schemes lift AUM

Investments in liquid schemes surged 83 per cent in January to Rs 1,62,437 crore; banks investments in MFs rise more than five times in first two weeks of January

Mumbai: Banks and companies invested large amounts in debt schemes of mutual funds, particularly liquid and money market schemes, in January to take advantage of rising interest rates.

The increased inflows into short-term debt schemes in January 2011 led to a 10 per cent increase in the average AUM of the mutual fund industry to Rs 6,91,080 crore compared to a decline of 5.8 per cent in the previous month, according to data released by AMFI on its website.

The increased interest in liquid schemes resulted in an 83 per cent rise in the AUM in these schemes to Rs 1,62,437crore.

Banks are perceived to be short of liquidity given the amounts they have been borrowing from the Reserve Bank of India (RBI) daily but their investments in mutual fund schemes had increased more than five times to Rs 70,999 crore as on January 14, 2011 from Rs 13,483 crore as on December 31, 2010.

Lakshmi Iyer - Sr. Vice President and Head-Fixed Income, Kotak Mutual Fund, attributed the substantial flows into mutual funds from the banking system to an improvement in the liquidity conditions.

The AUM of equity schemes fell in January in line with the fall in the stock market. The AUM of equity schemes had declined by 9 per cent to Rs 1,89,573 crore at the end of January 2011 from Rs 2,08,235 crore a month earlier.

The mutual fund industry collected a total of Rs 12,999 crore from the sale of units in NFOs in January 2011, a marginal increase of 3.3 per cent from the previous month. The mutual fund industry launched 49 fixed income NFOs mobilising Rs 12,874 crore, while one open ended ETF scheme from Motilal Oswal pooling in Rs 125 crore.