Mutual fund AUMs fall despite higher equity inflows in September

However, ICRA noted that the decline, however, masks continued strength in retail-oriented segments. For the month of September, equity schemes received net inflows of Rs 38,294 crore, which was higher compared to Rs 29,314 crore in August, while equity folios increased by 17.69 lakh during the month. Equity-oriented schemes recorded net inflows of Rs 38,294 crore in September, rising by Rs 8,979 crore, or 30.6%, from August.

The strongest mobilisation was seen in categories associated with diversified and growth-oriented investing. Nevertheless, equity AUM fell by Rs 1.7 lakh crore, indicating that positive investor mobilisation was more than offset by adverse market movements. Overall folios increased by 27.13 lakh to 28.62 crore, "reinforcing the view that the decline in AUM was not driven by a broad-based retreat in investor participation," said ICRA.

Income and debt-oriented schemes saw selling pressure. The funds recorded net outflows of Rs 1.8 lakh crore, compared with Rs 9,225 crore of outflows in August. "This category alone accounted for more than the industry’s overall net outflow because equity, ETFs and other categories continued to receive subscriptions," added the report. Debt AUM consequently declined by Rs 1.7 lakh crore to Rs 17.8 lakh crore.

As per ICRA, the immediate direction of industry assets will remain sensitive to equity-market performance and the reversal of institutional cash withdrawals from short-duration debt funds. "A recovery in market valuations or normalisation of liquid-fund flows could produce a relatively quick rebound in AUM," it added. For assessing the industry’s underlying health, folio growth, equity mobilisation and the composition of redemptions provide a more balanced signal than the monthly AUM movement in isolation.