Mutual Fund industry's AUM up 4.5 per cent in May2010

The cumulative asset under management (AUM) of the mutual fund industry grew by 4.5 per cent in May as compared to the previous month. This translates into an absolute growth of Rs 34,503.46 crore during the period. According to data provided by the Association of Mutual Funds of India (Amfi), the total AUM of the industry stood at Rs 8,05,239.37 crore at the end of May.

Among the 38 fund houses whose data has been made available, 23 fund houses registered a growth in their AUMs. Of these, 10 fund houses witnessed double-digit growth in their AUMs compared to the previous month.

New entrant Peerless Mutual Fund registered the highest percentage growth in AUM in May, clocking a growth of 65.9 per cent. Shinsei Mutual Fund, whose AUM grew by 45.6 per cent, was at second position.

SBI Mutual Fund and JP Morgan Mutual Fund, with AUMs of Rs 36,235.76 crore and Rs 3784.98 crore (as on 31 May, 2010) respectively, registered the maximum declines of 9 per cent and 8 per cent respectively in May.

Other fund houses that witnessed considerable increases in their AUMs were Fortis Mutual Fund and Baroda Pioneer Mutual Fund: their AUMs grew by 9.2 per cent and 9.1 per cent respectively in May.

Among the top four fund houses, except UTI MF which saw its AUM fall by (-) 1.1 per cent in May, all the other top asset management companies registered considerable increases in their AUMs. Reliance MF's AUM increased by 6.4 per cent and stood at Rs 1, 18,973.14 crore at the end of May. HDFC MF's AUM grew by 7.6 per cent and stood at Rs 1,01,863.31 crore. The AUMs of Birla Sun Life MF and ICICI Prudential MF too grew substantially by 6.2 per cent and 5.6 per cent respectively in May.

SIP

A SIP is nothing but a planned investment programme, which takes a small sum of money from you and invests it in a mutual fund at regular intervals. The minimum amount can be as small as Rs 500 and the frequency of investment is usually monthly or quarterly. This simple programme has a number of advantages.

First, if saving is an arduous task for you, then SIP can do this for you. Money deducted from your account (through post-dated cheques) and invested is money you cannot spend. And a rupee saved is a rupee earned. Even if each investment is small, over time this can add up to a neat kitty. And the power of compounding can do wonders. In due course of time, a small amount can grow into a significant amount. More importantly, an SIP does away with the need or effort to time the market. When the market is falling you may feel that it may decline further and that you should wait a while. Often stock markets make a recovery before you notice and the opportunity is lost. When markets are rising it is scary to invest money. Isn't it better that you wait for a correction and then make an investment? But if the correction doesn't come about, then even this opportunity is missed. And if markets are going nowhere, then what is the point in investing at all?

So, trying to find out which is the best time to invest can be a tough task. And that's why it is said that timing the market is futile. If one could take advantage of the ups and downs that markets encounter, it would be great. And this is where SIP fits in. By the process of regular investing one gets to invest in the highs as well as the lows, and this helps in averaging out the volatility in the market.

Some mutual funds suggest that contribution to an SIP programme should be increased in a full-fledged bear market. While this may be emotionally difficult, it can be rewarding when markets recover. But then this appears very much like timing the market and the purpose of an SIP is to avoid this effort.

Thus, an SIP imparts discipline to investing. Whether it is the regular act of saving or investing, an SIP does both automatically. While there are certain benefits of an SIP please remember it is no wonder drug that cures all investment-related ailments.

An SIP does not guarantee returns or positive returns. If you opt for an SIP in a falling market and the market continues to fall, then your investments will suffer a loss on the whole. An SIP does not guarantee a better return than a one-time investment. If you made a one-time investment when the Sensex was at 2,834 points in October 2002, then this would have performed better as compared to carrying out an SIP by spreading the investment over a period of time.

The emphasis on averaging out in an SIP obviously makes it most useful in case of an equity fund, as the volatility is greater here. An SIP can be useful for a debt fund as well...to help build a pool of savings. It can be thought of something akin to a recurring deposit where a part of your savings is automatically deducted from your account.

Overall, an SIP is a simple device that helps you to save and invest in a disciplined manner without having to time the market.

Performance of mutual fund in last month

The Indian equity market experienced a roller coaster ride during May. For the second time during a month in calendar year 2010 equities witnessed a fall, the first being in January, when the Sensex fell around 6.3 per cent. Both the benchmark indices Sensex and Nifty declined nearly 3.5 per cent and 3.6 per cent in May. Heavy sell-off across the globe was witnessed in reaction to the Euro zone debt worries and liquidity tightening in China. Foreign institutional investors, who invested Rs 8,415.9 crore in April, pulled out around Rs 9,975.4 crore from equities in May on account of global uncertainties.

Moving in tandem, the equity diversified category of mutual funds plunged nearly 3.6 per cent in May. This marked the end of their winning streak during the preceding two months. The category posted returns of 6.1 per cent in March and 2.7 per cent in April.

Sectoral indices: FMCG and Pharma

In May, all the major indices ended in the red, except for defensive sectors such as FMCG and Healthcare. Both these defensive sectors managed to land in the positive terrain and grew nearly 3.6 per cent and 2.7 per cent respectively in May. BSE Bankex was hit the most among all the sectoral indices, slipping around 4.5 per cent during the month.The other low-performing indices were BSE IT and BSE Auto which declined nearly 3.4 per cent and 1.3 per cent respectively.

Equity Diversified: only two funds up

Out of 256 diversified funds, only two funds ended the month in the green. All the rest 254 funds ended the month in the red. The top quartile of the month was occupied by two funds, namely Religare PSU Equity and HDFC Growth, as they were able to contain their downside. These funds posted a return of 1.36 per cent and 0.05 per cent respectively. Religare PSU Equity and HDFC Growth have asset under management (AUM) of Rs 235.14 crore and Rs 1,291.96 crore respectively.
Among the top losers were JM Basic and Bharti AXA Focused Infrastructure, which posted a decline of nearly (-)11.5 per cent and (-)9.8 per cent respectively.

Tax planning: all funds down

The category average return in Tax Planning was (-)3.7 per cent. All the 37 funds in this category ended the month in the red. The top three losers in this category were Bharti AXA Tax Advantage, Bharti AXA Tax Advantage Eco and DWS Tax Saving. They slipped around (-)9.6 per cent, (-)9.5 per cent and (-)6.4 per cent respectively.
Magnum Taxgain, the biggest fund in this category with AUM of Rs 5,521.5 crore as on May 31, 2010 posted a decline of (-)3.01 per cent in returns.

Sectoral: Pharma and FMCG lead

Equity FMCG and Equity Pharma were the best-performing categories in May. They registered gains of 2.5 per cent and 2.4 per cent respectively. The five-year trailing returns of these two categories stood at 19.8 per cent and 20.8 per cent respectively.The worst performer during the month was Equity Technology. It declined nearly (-)4.1 per cent. Birla Sun Life New Millennium, which posted (-)5.7 per cent returns, was worst hit in this category.

Hybrid Equity Oriented (Balanced)

This category posted a negative return of (-)2.3 per cent as against a positive return of 2.16 per cent in April. The one-year trailing return of this category registered a return of 20.8 per cent. The top two performers in this category were Edelweiss Absolute Return Equity and HDFC Balanced, which had returns of 0.5 per cent and 0.3 per cent respectively during the month.The two worst performers were LICMF Balanced and Escorts Balanced, which posted returns of (-)6.1 per cent and (-)5.6 per cent respectively.