MFs back in the saddle

Mutual funds have turned net buyers of equities in May after two successive months of net selling. So far this month, domestic funds have bought shares worth Rs 2,000 crore, while foreign institutional investors (FIIs) have bought Rs 1,343 crore. If one excludes flows on account of Eicher Motors' block trade, FIIs are net-sellers for this month.

Equity MFs, which saw outflows of Rs 1,370 crore in March, received inflows of over Rs 4,400 crore from investors in April Buying by domestic fund managers and inflows into equity schemes is positive for the market as FII flows are starting to moderate. Some analysts project FII activity to remain weak in the near-term.

"Seasonally, May and June are bad for FII flows and equity returns. This looks likely to be the case this year, with several macro-economic and geo-political uncertainties lined up over the next six weeks," says Manishi Raychaudhuri, Asia equity strategist at BNP Paribas. Raychaudhuri says domestic flows "will be sufficient to neutralise FII outflows in India."

Mutual fund industry players are hopeful that flows will remain positive as investors continue to remain positive on the market from a long-term perspective.