Mark-to-market losses in equity markets to test profitability of MFs

September quarter profitability of mutual funds will be tested by mark-to-market losses in equity markets, according to wire material from a financial news source. Despite steady inflows into equity schemes via Systematic Investment Plans (SIPs) and lumpsum investments, the impact of the losses may be felt. Among the top fund houses, SBI Mutual Fund, ICICI Mutual Fund and HDFC MF reported significant increases in average assets under management (AUM) for the quarter, with SBI MF leading at ₹13.09 lakh crore.

However, these AMC houses saw a 4 per cent rise in AUM on a sequential basis, with the sharpest decline occurring in early September and October.

Research analyst Shobhit Sharma from Elara Capital stated that September is expected to be a weak quarter for asset management companies (AMCs) due to lower mark-to-market gains in assets under management. However, systematic investment flows are providing a saving grace. Aditya Birla Sun Life AMC is an exception, as the Employees' Provident Fund Organisation mandate of ₹6 lakh crore will be reflected in the AUM for the full quarter.

Chief Investment Officer and Co-Founder of InvestValue, Aditya Agarwala, shared that while core earnings may hold up in September, reported profits may appear weaker, with the most significant impact in the December quarter if the correction persists. Treasury and seed investments, which are also marked-to-market, could contribute to lower or negative gains this quarter.

Market sentiment has already priced in the weak September quarter, with HDFC AMC down about 14 per cent over three months, and Nippon India MF and ABSLife AMC down about 11 per cent each. Head of Research at Ventura, Vinit Bolinjkar, noted that Nifty declined about 5 per cent during the quarter, with most of the fall occurring in September. Despite the broader market decline, equity-oriented schemes, which carry higher fee yields, sustained weakness affecting the blended revenue yields.