Equity fund managers, who manage assets worth Rs 5 lakh crore, have turned net sellers of stocks this month. The previous monthly outflow by mutual funds (MFs) was in July 2016.
The selling, albeit marginal, comes after benchmark indices rallied four per cent since the start of the month and 12 per cent since the December 2016 low. Their cautious stand is reflecting in this month's investment pattern, with equity fund managers pulling out a net Rs 78 crore till last Thursday.
A chief investment officer, managing a little over Rs 20,000 crore of equity assets, told this newspaper on condition of anonymity that "these are precarious levels -- not in the interest of investors, given the poor earning growth fundamentals".
Adding: "It's all liquidity which is taking the markets higher. There are near-term uncertainties like state election results and revival in corporate earnings. We are taking a defensive stand in the portfolio and for investors, it would not be a bad idea to book partial profits from here on."
Last month, fund managers had slowed on investment and put Rs 5,234 crore in shares, a steep fall of 40 per cent against what they stoked in December. The aggregate cash level of equity schemes stood at a multi-year high at about five per cent in January.
Kaustubh Belapurkar, director (fund research) at Morningstar India, says, "There has been quite a lot of volatility in stock markets, while inflows were strong. Generally at such times, fund managers tend to be more cautious, right to an extent."
There has been strong buying in the past few days from fund managers but selectively. Infosys, Tata Consultancy Services, Tata Motors, Sun Pharmaceuticals, Aurobindo Pharma and Asian Paints are emerging as favourites.
The equity segment of MFs has been getting a consistent monthly supply of fresh flow worth Rs 4,000 crore through Systematic Investment Plans. In the demonetisation-hit December quarter, there was a surge in net inflow to a whopping Rs 30,000 crore on an aggregate basis. The bigger part of this large sum has not yet been infused in stocks, resulting in higher cash levels. Thus far in 2016-17, equity schemes have got total inflow of a little over Rs 50,000 crore.