India’s Mutual Fund (MF) companies fared rather poorly in August, but considering that the market conditions were generally stressed, this was only par for the course, and MFs still remain the best option for individual investors, felt investment experts.
“There is way too much monitoring of the markets on a daily basis for the individual investor to go directly to the markets,” said Srikanth Meenkashi, COO, FundsIndia.com. “(In August) people were securing their capital because of volatile market movement. People were taking money off the market.”
The Indian mutual fund industry’s month-end AUM saw a meager 0.7% growth to `7.66 lakh crore in August, according to the Association of Mutual Funds in India (AMFI).
“The fact that MF AUM (assets under management) grew at all, is heartening,” said Meenkashi.
“There was a lot of reallocation in August with people preferring to reallocate assets into liquid ffunds and fixed maturity plans,” says Vikaas Sachdeva CEO of Edelweiss Asset Management. Liquid funds typically mature in under a year. Liquid funds’ AUM rose by 16%.
Gilt funds saw an 8.4% rise in AUM to `89 bn in August as market participants renewed interest in government bonds after the RBI announced steps to ease long-end bond yields on August 20.
The recent rise in bond yields due to the liquidity-tightening measures by the RBI attracted a lot of buying interest in fixed maturity plans (FMPs). FMPs are closed ended funds which lock-in the yields (currently high) over the time period of the scheme.
Going forward government spending, environmental clearances and the monsoons will be positives for the MF industry, as indeed for the economy in general, while the quantitative easing in the US and any rupee slide will be negatives. For the individual investor, MFs remain the best option.
“Regardless of which asset class you are interested in (gold, equities etc), if you don’t have the knowledge then MFs are your best bet,” said Sachedeva.