Mutual fund AUM touches record high in May

Over the last few years, election result days have witnessed stock market indices bouncing up by wide margins. And May 23 was no exception, the S&P BSE Sensex jumped over 2.5% to touch the then life-high of 40,124.96 points.

The latest industry data released by the Association of Mutual Funds in India (AMFI) for the month of May shows there was similar euphoria in the mutual funds industry as well.

According to AMFI, the mutual fund industry’s assets under management (AUM) grew by 4.63% in May to ₹25.94 lakh crore, compared to ₹24.79 lakh crore a month ago. On an annual basis, the industry AUM grew by 14.78% compared to ₹22.6 lakh crore in May last year.

When seen on broader horizon of 10 years, AMFI data reveals that industry AUM grew almost five times or 16.1% on 10-years’ compounded annual growth rate (CAGR) basis from ₹5.83 lakh crore in June 2009. And, on a medium term basis, mutual funds’ industry AUM has registered nearly 2.66 times growth; or 21.62% CAGR from ₹9.74 lakh crore in June 2014.

AMFI data also reveals that mutual funds continue to be skewed towards income or debt-oriented schemes, which at ₹13.26 lakh crore in May 2019 account for over 51.12% of the industry AUM. Equities, which also include equity-linked savings schemes (ELSS) add up to ₹7.59 lakh crore in May, which grew by 2.82% and 2.42% on a monthly and annual basis respectively.

At a time when the industry AUM touched a record high in May 2019, the net inflows of ₹76,990 crore were a whopping 30.48% lower than ₹100,460 crore in April 2019. The downside reflects fall in net inflows in Income/Debt Oriented Schemes category at ₹67,930 crore in May 2019 as against net inflows of ₹101,918 crore in the previous month, according to a note by ratings agency ICRA.

Interestingly, inflows in equity funds (including ELSS and close-ended schemes) had registered a significant fall of 45.48% in April 2019, at ₹4,229 from ₹7,758 crore in March 2019. However, in May 2019, the same schemes registered a 17.47% growth in net inflow at ₹4,968 crore. The upside was driven by political stability and healthy corporate earnings growth, according to AMFI, notes ICRA.

A segregated analysis of equity and ELSS net inflows over the last five years, from June 2014 to May 2019, reveals that equities witnessed just 2 months of net outflows – ₹3,206 crore and ₹45 crore in March 2016 and June 2016. In contrast, ELSS have seen just one month of net outflow – ₹156 crore in June 2014. In terms of highest inflows, August 2017 saw a net inflow of ₹19,515 crore, while ₹3,703 crore worth in net inflows came in ELSS schemes in March 2018.

While income or debt schemes have a lion share of the industry AUM, equities command the highest – 71.85% of the total number of mutual fund folios. While the total number of folios (including fund of funds) grew by 0.62%, to 8.37 crore in May 2019, equities (including closed ended funds) had over 6.01 crore folios in May 2019.