Total Mutual Fund AUM crosses 8 lakh Cr. in Nov 2009.

Average assets under management (AAUM) by Indian mutual funds crossed the Rs 8 lakh-crore mark for the first time and are almost 64% higher than the Rs 5 lakh crore that the industry was managing in March this year. We are able to see this because of the retail investors contribution, and banks, companies and institutional investors, preferred MFs as it was safer then the risks of lending and investing in a volatile economy.


Mutual funds investments have always been a safe bet for investors. The systematic investment plan (SIP) allows the investor to take advantage of averaging. We can see more participation coming from the investors when the markets are high as they react to its swings. But the smart investor will always continue his SIP irrespective of Market movements.

Consider an example, where an investor started his SIP in Oct 2008 when markets were crashing and reached 7500 levels on Sensex. Today within a year’s time it has reached 17000 levels, hence allowing the investor to get returns more than 60% in major schemes. This is the power of compounding by SIP.

Also, it allows the investor to invest amount which starts with 500 Rs. every month. Hence for investors who cannot participate directly in the market due to insufficient liquidity, they can participate in markets through these SIP’s.
Reliance Asset Management Company, continues to dominate the Mutual Fund market with AAUM of over Rs 1.22 lakh crore, while HDFC Asset Management is at second position with AUM of more than 1 lakh crore. HDFC AMC has become the second fund house to cross the Rs 1 Cr. mark.

The Markets surged this year by the UPA election results, which increased the value of all Mutual Investors in a day by good extent. Since April this year, while equity MFs, including the socalled equity linked savings scheme (ELSS) which offer tax breaks, have seen net inflows of just Rs 3,572 crore until October this year, while debt schemes have seen an influx of over Rs 2.5 lakh crore during the same period. More funds will be coming into this market by the source of Tax Savers as investors will park their money in MF’s for saving their taxes.

Banks are the major contributors to this year’s growth in AAUM as they are aggressively investing in MFs. Banksinvestments with MFs have grown from about Rs 45,000 crore at the end of March 2009 to over Rs 1.6 lakh crore as on the first week of November 2009. Their investments in same months last year were Rs 18,692 crore in March 2008 and Rs 18,722 crore as on first week of November 2008.

Our recommendation for Mutual Funds:

1. HDFC Top 200 Fund.
2. Reliance Regular Savings Fund.
3. Birla Sunlife Front Line Equity Fund.
4. ICICI Infrastructure Fund.
5. Kotak 30 Fund.

Thanks,
Nimesh.