Many of you might have missed to notice that S&P BSE Sensex recently touched its two month low. Foreign Institutional Investors (FIIs) have started pulling out money. This may just be on account of profit booking but such developments shouldn't be ignored at all. Especially, when there is great optimism among investors. The market rally that happened over last one year has now started attracting retail investors. More and more people are willingly putting money into equity markets. Assets under Management (AUM) of mutual funds reached to the all-time high mark in September. PersonalFN shares its view on current market scenario and also tells you how you can manage your finances wisely.

Rapid rise in AUM...
Led by robust inflows in equity oriented funds and in the debt funds with shorter maturities, AUM of mutual funds touched Rs 10.59 lakh crore by the end of September 2014. Mutual fund AUM had crossed the Rs 10-lakh crore mark for the first time in May this year. However, it is noteworthy that not all mutual funds are the beneficiaries. Large mutual funds are getting larger and industry operations are highly skewed in favour of top 5 mutual funds. Top 5 mutual funds are managing about 55% of the total AUM.
 

One Trillion Club...

As per the data published by Financial Express on October 08, 2014
(Source: Financial Express, PersonalFN Research)

Big push from equity funds...
AUM of equity oriented funds registered a massive increase of Rs 55,381 crore in the second quarter of Financial Year (FY) 2014-15. This has been the highest rise in any quarter after the one ended on September 30, 2010. Equity assets of mutual funds amounted to Rs 2.91 lakh crore on an average. Upbeat sentiment and rising markets have encouraged retail investors to bet on equities. Birla Sun Life Mutual Fund has clinched the fourth slot as far as size of AUM is concerned. The fund house has launched a number of New Fund Offers in the recent past. The same is true with ICICI Prudential Mutual Fund.

Mixed bag for debt funds...
Budget 2014-15 changed the tax treatment for debt funds and Fixed Maturity Plans (FMPs) making them less attractive. Tight monetary policy further discouraged investors from betting aggressively on funds with longer maturities. On the other hand, funds with shorter maturities helped mutual fund houses garner record AUM as investors.

As far as AUM of mutual funds is concerned, PersonalFN is of the view that, size of a mutual fund doesn't tell you anything about its commitment to servicing its customers. It is possible that a smaller mutual fund house may have equal level of commitment as that of a bigger fund house. However, the market regulator, Securities and Exchange Board of India (SEBI), has adopted a negative stance against fund houses with lower net worth.

Being a research oriented company; PersonalFN considers various parameters to rank mutual funds but doesn't consider AUM as a barrier for recommending them under normal circumstances. On the contrary, it slashes fund house rating of those launching NFOs that have no unique feature. PersonalFN is of the view that, investors shouldn't fall for NFOs and invest only in funds that suit their requirements. Furthermore, PersonalFN believes investors should also refrain from taking aggressive calls as market appears to be overvalued at present. You need to tread cautiously and invest in a stagger manner.

As an investor, you should focus on your financial goals and chalk out an asset allocation plan for yourself. Right asset mix may help you generate wealth and fulfill your goals. Falling prey to latest investment fads may prove to be harmful to your portfolio. Therefore, PersonalFN suggests you not to get carried away by the record rise in AUM of mutual funds and stick to your asset allocation instead.

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vinod.harjai8@gmail.com Oct 10, 2014 congratulations HDFC AMC for achieveing this much growth in AUM , without Launching new funds, existing funds have contributed ur increase in AUM, WHICH CLEARLY SHOWS THAT UR FUNDS ARE PERFORMING.

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