Liquidity gush keeps equity MFs busy

Fund managers have been buying lot of timely stock while faring not so well in sale of holdings

Amid a gush of liquidity, equity fund managers have been doing a lot of timely stock buying, while faring less well in sale of holdings.

The year started with the most buying in Infosys, the favourite information technology stock of fund managers. However, they took a sell call on peer Tata Consultancy Services (TCS). The following month, the latter rallied 11 per cent and Infosys by nine per cent.

Fund managers’ sell call on Axis Bank, Grasim Industries and HDFC Bank did not turn out well. All these counters gained quite a lot. Rather, on Axis and Grasim, fund managers continuously failed with their sell calls. They soon reversed strategy on HDFC Bank and after selling the counter in February, infused nearly double the amount.

On an aggregate level, of the 20 buy calls taken during January-April (tracking the five most bought stocks per month), 16 of these rewarded the fund managers; only four went wrong in the short term. But, of 20 selling decisions, they proved wrong on 13 occasions.

Shares of ICICI Bank, Indian Oil and ITC were consistently chased by fund managers and all these counters have made substantial gains for schemes’ portfolios. The recent listing of Avenue Supermarts (D-Mart) was one of the best calls.

It is necessary here to clarify that the short-term implications of selecting stocks can’t be the barometer of judging managers’ investment decisions. They tend to buy stocks with a long-term vision, not with a short-term strategy.

Fund managers have increasingly been cautious on the steep run seen in Indian shares over recent months. With ample money flows, via fresh inflow and by liquidating mid-cap and small-cap stocks, the cash level is above 6.5 per cent. This is the highest since the post-Lehman crisis.

Currently, there are nearly 500 equity schemes in the mutual fund sector, managing a total of assets under management of nearly Rs 6 lakh crore.