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Will uptrend in mutual funds continue?
Fri, 5 Jul Pre-Open

The mutual fund industry is continuing to have an impressive year. After witnessing a robust growth in the month of May, the mutual fund asset base continued to rise in the following month. And the trend did not stop there. The average assets under management (AUM) of the mutual fund industry moved up 3.68% to touch a new high of about Rs 847 bn in April-June. This is the increase for the fifth consecutive quarter.

But before you start thinking that investors have started flocking back to the stock markets, let us tell you that the momentum in the mutual fund industry has been primarily led by the debt oriented fund categories. And this month was no different.

What continues to be a cause of concern is the ever declining equity asset base. With the looming uncertainties in the domestic as well as global economy, investors have assumed a very cautious approach. As a result the overall share of the equity base in the overall mutual fund AUM has declined substantially over the past few months. It was only in the month of March that the category witnessed inflows post which it went back to a declining spree. The average AUM of equity mutual funds fell for the sixth consecutive quarter.

Gold prices globally continued to remain under pressure. Investors continue to remain wary of investing in what was once their favourite investment avenue.

Over the medium term, it seems that debt funds will still continue to attract the majority of flows owing to the favourable interest rate cycle. Investors are likely to continue to capitalize on downward changes in interest rates. Hence, going forward also one can expect more inflows into Gilt, dynamic and income funds.

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