March redemptions halt bullish AUM numbers’ rally

utual fund AUM rose to Rs5 trillion in February from Rs4 trillion in November

Indian mutual funds may have seen an outflow of as much as Rs50,000
crore from their assets under management (AUM) in March under heavy
redemption pressure from banks before the end of the fiscal, according
to people in the asset management business.

Mutual fund AUM rose to Rs5 trillion in February from Rs4 trillion in
November. According to data available with the Association of Mutual
Funds of India (Amfi), investments in liquid or money market schemes
contributed Rs42,000 crore in January and February alone, accounting
for at least 42% of the increase.
The run-up in AUM may have been short-lived, according to people in
the mutual fund industry who didn't want to be named.
Of the Rs42,000 crore parked in liquid schemes in January and
February, at least 95% was invested for the short term by banks, which
redeemed money from such funds before Tuesday's end of fiscal 2009 in
order to maintain adequate capital on their balance sheets, these
people said.
Fixed-income heads across the mutual fund industry and distributors
told CNBC-TV18 that as much as Rs50,000 crore had been redeemed.
People at one of the country's large mutual fund houses said banks had
redeemed Rs6,000 crore of the Rs8,000 crore they had parked in its
liquid funds. More redemptions are not being ruled out, they said.
SBI Mutual Fund, too, has witnessed the redemption of Rs3,000-3,500
crore by banks from its liquid schemes, people said.
People at UTI Mutual Fund said banks likely pulled out money to the
tune of Rs3,500 crore from its liquid schemes. Companies, too, may
have withdrawn Rs5,000-6,000 crore in March.
"This is a seasonal tendency and is chiefly for tax purposes. The
money is kept for short term and will eventually come back into the
schemes," said A.P. Kurian, chairman of Amfi.