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MF inflows cross Rs 1,000 bn, growth schemes steal limelight - Views on News from Equitymaster
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  • Mar 4, 2000

    MF inflows cross Rs 1,000 bn, growth schemes steal limelight

    The Indian mutual fund (MF) industry has registered cumulative inflows of Rs 1,010 bn by end of January 2000. With this the industry has pierced the Rs 1,000 bn level.

    January 2000 was a good month for all segments of the Indian MF industry, insofar as all of them witnessed net inflows. This is an interesting feature, and perhaps even unprecedented. Figures for January 2000 were released by the Association of Mutual Funds of India (AMFI).

    Leading the inflows brigade are the overseas private joint venture (JV) funds (Rs 14.2 bn), followed by Indian mutual fund JVs (Rs 9.6 bn), Indian mutual funds (Rs 2.6 bn), Unit Trust of India (Rs 4.2 bn), bank-sponsored funds (Rs 2.5 bn) and institution-sponsored funds (Rs 2.0 bn).

    As on 31st January 2000, Unit Trust of India (UTI) had net assets amounting to Rs 671.1 bn, which accounts for 66.5% of the MF industry. Private sector funds come next with 23.0% of net assets with net assets amounting to Rs 232 bn. Institution-sponsored MFs account for 3.2% of the MF segment (Rs 31.8 bn) while bank-sponsored MFs account for 8.0% of the MF industry (Rs 80.4 bn).

    Net inflows in January 2000 amounted to Rs 350 bn. Of this, growth schemes accounted for Rs 168.8 bn. This can be attributed to the overwhelming response to the slew of MF offerings in the recent past. However, with the latest budgetary proposals, the MF scene could change dramatically. Investors who want to park their long term capital gains could invest in debt schemes in a big way, before the April 1, 2000 deadline, after which sections 54EA/EB will be annulled. Post-April 1, 2000 income schemes could witness a decline in inflows with the 22% effective tax rate on dividends from income schemes.

    As far as growth schemes are concerned, the impact of the budgetary provisions will not be as hard-hitting as in the case of income funds. This is because growth schemes have attracted a lower percentage of 54EA/EB funds (2-3%) as compared to income funds (10-15%). Moreover, with the aversion towards income schemes, investors (with an average risk profile) may migrate towards growth schemes, regardless of the annulment of section 54EA/EB.



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