MF mobilisation to touch Rs 50,000 cr

MF mobilisation to touch Rs 50,000 cr
ENS ECONOMIC BUREAU

MUMBAI, MAR 18: Mobilisation by mutual fund schemes is likely to touch the Rs 50,000 crore mark by the end of the current fiscal ending March 31. As of January end, mobilisations by mutual funds (MFs) topped Rs 43,293.65 crore, an amount almost double the Rs 22,710 crore garnered in the whole of the previous fiscal.

Thus you have funds declaring dividends in the range of 40 per cent, a mere four months after they are launched. Sebi, commenting on the trend has said, "probably organisational and ownership structure has been influencing the performance of mutual funds."

At the end of January the combined net assets outstanding of the mutual fund sector stood at Rs 1,00,008.68 crore - with private sector mutual funds' assets at Rs 23,398.28 crore (23.4 pc of the total), assets of public ector MFs at Rs 10,746.23 crore (10.74 pc) and UTI's at Rs 65,864.16 crore (65.86 pc). If one coniders the fact that UTI has had a headstart over the rest of the industry by nearly three decades, the performance of the private sector funds is quite impressive.

The swing away from the public sector to private sector funds actually started in April last year, since until March 1999 the net assets of public sector funds were higher than those of the private sector.

According to available figures in March so far, mutual funds have been quite aggressive and in fact, net buyers in equities, while they were net sellers in February. Gross purchases by mutual funds this month so far amount to Rs 1688.72 crore, while sales were of the order of Rs 1436.75 crore, net investments coming to around Rs 252 crore.

Compare this with February figures where the MF sector was a net seller to the tune of nearly Rs 670 crore. According to industry watchers, the dip in prices of scrips, especially in the crucial information technology sector has led MFs to pick up fancied scrips at bargain prices.

However, the current month has also seen MFs dumping debt instruments with sales outstripping purchases by Rs 131.35 crore. One reason for this is lots of income funds are in the market to declare dividends and this could have led to profit-booking by the funds. Another very major reason cited by the industry is the increased tax on dividends by income funds, which has led to the funds turning away from debt to equity-oriented schemes.

In February, however, MFs had been net investors in debt instruments. With the index expected to fall further and with a large number of schemes having been launched in the recent past the appetite for equities by the mutual fund sector is expected to remain.

While some redemption pressure is expected to be felt by the mutual funds, with the stock markets in an uncertain mood, retail investors are expected to take the MF route for investments rather than out in money in shares directly.