Equity fund managers get a breather

November surge beyond 21,000 decisively slows earlier outpour of redemption requests from retail investors

The selling of shares by India’s equity fund managers has slowed in November.

With the Sensex decisively crossing the 21,000 mark in the early few trading sessions this month, it appears the earlier panic among retail investors has taken a back seat for now.

Net selling of stocks by fund managers so far this month is Rs 1,660 crore. In October, they sold shares worth Rs 4,018 crore, the highest since January. With another week’s trading this month, fund managers have their  fingers crossed.

“Bringing in retail (investors) continues to remain a challenge,” says Navneet Munot, chief investment officer (CIO) at India’s sixth largest fund house, SBI Mutual Fund.

Agrees the chief marketing officer of a mid-sized fund house. “Redemptions continue to hit equities but this time they’re relatively less. There is a possibility that having tasted levels of 21,000, the retail investor) is a bit encouraged to stay invested.” According to him, the recent corrections have caused a pause on redemptions.

Last month, when the indices were inching higher, with the Sensex surpassing 21,000 levels and the Nifty kissed the 6,300 mark in the last few sessions in October, there was huge redemption pressure. Fund managers had to sell holdings to honour investors’ calls. Overall net outflow was Rs 3,542 crore, the highest since September.

Said the CIO at a foreign fund house, “This month’s selling should be seen more as profit booking, not an outcome of redemption pressure. The situation from a retail perspective has not improved much and sales continue to remain poor.”

Interestingly, earlier whenever the Sensex used to hover around 20,000, the fund sector’s equity segment used to be hit hard, amid an outpour of redemption requests. This time, it appears the psychological level which triggers panic has shifted upward.

According to the chief executive officer of a small-sized fund house: “In two scenarios, we can have a similar kind of pressure -  if the market slips below 20,000 or approaches 21,000. Between these, panic selling is unlikely.” As on October-end, the total of assets under management in the equity segment was Rs 1.73 lakh crore, a fifth of the segment’s overall AUM of Rs 8.33 lakh crore.