Buying by mutual funds regains pace in February

Fund managers pump in Rs 4,300 crore amid sharp volatility

Equity fund managers pumped in Rs 4,300 crore into stocks last month, amid sharp volatility in the market, which saw the benchmark indices move in a five per cent band. Equity mutual fund managers have been pumping in an average Rs 3,300 crore into the stock market in the current financial year. However, the pace of buying had slowed in January when the market had hit an all-time high, having purchased shares worth only Rs 880 crore.

Fund managers with strong inflows are applying ‘buy on dips’ strategy, say industry observers. Whenever there is a risk-off trade or sustained selling by overseas investors, fund strong buying has been witnessed. February was a best illustration of this approach, when the BSE Sensex hit a low of 28,045 and a high point of 29,560. The equity fund managers made the most of this wild market movement and pumped in Rs 4,309 crore to buy shares. The quantum invested in February was the second-largest since November last year and fifth highest so far in the current financial year.

On February 10, the indices touched the month's lowest as Sensex dipped close to 28,000 level and fund managers bought shares worth Rs 781 crore. Similarly, on February 12, they pumped in Rs 701 crore.

It is interesting to note that of the 20 trading sessions available in February, fund managers were net buyers on 17 days. The major quantum of their buying came on five days — the most volatile trading sessions. Put together, they put in nearly Rs 2,500 crore during these five days — which is around 60 per cent of their total buying during the month.

S Naren, chief investment officer of India’s second largest fund house ICICI Prudential Asset Management Company, had earlier told Business Standard, “We continue to follow the buy on dip strategy and believe that going forward market will keep throwing such opportunities.” According to him, for long, Indian investors had been underweight on equities at a time when India was poised to be the best market to be in.

The total net investment by fund mangers in stocks thus far in 2014-15 has touched Rs 36,782 crore amid robust net inflows in the equity segment. If industry sources are to be believed, February witnessed net inflows of Rs 7,000 crore. The Association of Mutual Funds in India will release the official monthly statistics later this week.