The mutual fund data for the month ending November 30, released by the Association of Mutual Funds of India, is another indicator of the improved liquidity situation in the country as the liquid funds witnessed a rise in the assets under management (AUM) by 24 per cent or over Rs 17,447 crore.
“Things have improved after October and more corporates and banks are coming in,” said K Ramkumar, head of fixed income, Sundaram BNP Paribas AMC.
The liquidity crunch in October forced the institutions to withdraw their money from their investments in liquid funds (short-term investment) and liquid plus funds (slightly longer in term than liquid funds). This brought the mutual funds under huge redemption pressure, which seems to have eased now.
As the call money rates declined showing signs of improved liquidity situation, money started flowing back to the mutual funds.
“Lot of institutions including banks had surplus liquidity and it flowed into the mutual funds,” said Amandeep Chopra, head, fixed income, UTI AMC.
The mutual funds expect the situation to get better as things are improving fast. The mutual funds off-take from the RBI’s liquidity adjustment facility (LAF) has also reduced significantly. It has come down to less than Rs 3,000 crore now from a high of daily off-take of Rs 15,000 crore in October. “We don’t need that money now as we are well placed now,” said Chopra.