MF Update: Domestic AUM grew by 8 per cent sequentially

For the month of November, the domestic asset under management (AUM) grew by 8.07 per cent sequentially. It has reached to Rs. 24.03 lakh crore at the end of November 2018. What has helped this growth is the strong inflows into liquid schemes which increased from Rs. 55,296 crore in the month of October to Rs. 1.36 lakh crore in the month of November 2018. This is after liquid fund saw a sharp cut in their inflows to the tune of Rs. 2.11 lakh crore in the month of September on the wake of NFBC liquidity crisis. The hike in inflows shows that liquid funds have stabilised for now. A 30 per cent fall in the crude oil prices from its recent peak and a moderation of inflation expectation has led to a lower interest rate hike expectation, which brought-in more inflows to liquid funds.

Nonetheless, what has not gone well in the month of November is the inflows to equity-dedicated funds. They have declined hugely, down by 37 per cent on a monthly basis. For the month of November, equity inflows stood at Rs. 10,790 crore compared to Rs. 14,783 crore in the month of October. Equity inflows include inflow to arbitrage funds and equity-linked saving schemes. Anecdotal evidence suggests that investors are abstaining from making lumpsum investments, whereas investment through SIP seems to be intact at the levels seen in the month of October.

The uncertainty arising from the recently held state elections casts a shadow on the outcomes of the next year's general elections. This is stopping investors from committing their funds. At the end of November, the share of equity AUMs (including arbitrage and ELSS) has declined by 200 basis points of the overall AUM and stood at 35 per cent.