Fund houses turn net buyers of equity after five months

Domestic mutual fund (MF) houses turned net buyers of equity in November after five months of net selling.

According to Securities and Exchange Board of India (Sebi) data, fund houses had bought shares worth Rs 1,557 crore in November till Friday.

Though this is minuscule compared to the net selling of Rs 23,015 crore till October this year, fund managers are positive. Some said they would prefer to remain on a buying spree in the coming days.

Notably, a majority of the buying happened on November 4, Coal India’s listing day.

“After the Coal India allocation, fund houses got the remaining money back, which is now being used,” said the chief investment officer of a mid-sized fund house.

Though the industry is still facing redemption pressures, fund managers say the strain has reduced substantially, compared to the past two months. The industry saw redemption of close to Rs 15,000 crore in the first two quarters of the year.

“We are witnessing fresh inflows, especially through the systematic investment plan (SIP) route. After Coal India’s listing, risk appetite among retail investors is back,” said the equity head of another fund house.

In October, MFs sold equities worth Rs 5,800 crore. “Some portion was used to meet redemption, but fund houses had to generate cash for Coal India, too. Players were sitting on significant cash after allocation of shares and that is being deployed now,” said the chief executive officer of a large fund house.

Fund houses said they were maintaining a wait-and-watch policy. “The US quantative easing has been positive. The Coal India listing was also successful and so the overall sentiment in the market is positive,” the CEO added.

On September 30, assets under management in the equity segment were Rs 2,26,226 crore.

Fund houses are betting big on inflows through the SIP route. According to the statistics from Computer Age Management Services, a mutual fund registrar, SIPs have seen a remarkable rise since May. August saw fresh SIP registrations of 324,000, a rise of 160 per cent since September 2009.