After 4 months of buying, mutual funds turn sellers

Fund managers have net-sold shares worth Rs 310 cr this month, taking cash calls ahead of big-ticket share sales

After buying aggressively for four consecutive months, India’s equity fund managers have been net sellers so far this month. As key benchmark indices turn volatile ahead of a vital US Federal Reserve meeting, fund managers are taking some money off the table, while maintaining a bullish long-term view on India.

According to Securities and Exchange Board of India (Sebi) data, in the first half of September, equity fund managers net-sold shares worth Rs 310 crore. That sum, however, is little compared to the Rs 15,000 crore of investment by mutual fund houses between May and August.

“There is a little bit of profit-booking, as valuations of many stocks are far too stretched. It’s a tactical call and should not be seen as a strategic change, as there is long-term bullish view on India,” said Niranjan Risbood, director (fund research), Morningstar India.

As of September 15, fund managers’ gross purchase of stocks stood at Rs 8,572 crore, while their gross sales stood at Rs 8,883 crore

“Valuation is an important factor. You can’t be a permanent bear or a bull in sectors and stocks. Irrespective of sectors, there are several stocks trading at 30-40 multiples or more. We feel it’s better to move out from them and look for other avenues. Rotation of sectors and stocks is important to take advantage of a bull market. That is precisely what’s happening; it should not be seen as if we are turning bearish and the situation is alarming,” said the chief investment officer of one of the top five fund houses.

Experts say the government’s disinvestment plan is about to start soon. Fund managers might be preparing to have ample cash to participate in such fresh issues, along with private placements from other companies, which often come at discounts.

“Since we are getting into yet another disinvestment phase, along with qualified institutional placements, I think fund managers want to be ready with cash holdings. More, funds with asset allocation mandates might be reducing exposure to equities and increasing cash levels,” said Manish Gunwani, senior fund manager at ICICI Prudential Mutual Fund.