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Sharp fall in stock prices seems to have hit mutual funds hard

With the stock market prices falling sharply mutual fund industry is struggling to keep their net asset value (NAV) ticking

03 Jul 2008

With the stock market prices falling sharply, the mutual fund industry is struggling to keep their net asset value (NAV) afloat. The fresh flow of fund is not expected.  The investment is appearing to be drying up.

The average asset which the fund houses manage (AUM) is down by 11per cent in June, marking the highest negative growth for the month. As per the data released by the Association of Mutual Fund (AMFI), AUMhas declined to to Rs 543,000 crore as compared to  over Rs 600,000 crore during May 2008. The figure does not include AUMs of Sundaram BNP Paribas, ING, Taurus and BoB.

According to the industry insiders, in the  month of June, there are outflows on account of advance tax payments. This time around, liquidity has been  sucked out from the mutual fund industry after the recent interest rate hike. Many  banks have also pulled out money from mutual funds to invest directly into the money market where rates have gone up significantly.

Fund managers are denying any pressure on heavy redemptions but they have concede that  net inflows in the equity schemes have seen a significant dip. In the  first quarter of 2008, there have been net inflows of around Rs 30,000 crore into the equity schemes which has come down 10 times to nearly Rs 3,000 crore in the second quarter.

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