MFs cut equity allocations, investment dips to Rs 270 cr in Jan

Fund managers say markets have run far beyond fundamentals in January

India's equity fund managers are on a selling spree, having sold shares worth Rs 1,500 crore in the last few sessions, a rare event since Narendra Modi-led BJP government came to power in May last year.

Put together till January 29, 2015, fund managers' net investment in stocks fell to Rs 270 crore - the lowest in eight months. In the previous month, they pumped in a little over Rs 7,000 crore.

In the initial days of January too, fund managers had continued heavy buying, but post the RBI rate cut on January 15 there was a visible decline in their allocations to shares.

According to equity heads, markets have run far beyond the fundamentals in January. Levels of 8,800 to 9,000 on Nifty is too high, which prompted them to cut allocations, they said. 

"With this pace, markets will start discounting even FY18 soon, which is not healthy and corrections look inevitable," said chief investment officer (CIO) of a foreign fund house.

However, the net inflows in equity schemes have been quite robust thus far this fiscal. Already, investors have pumped in nearly Rs 50,000 crore in equity schemes.

The recent slowdown in investments could be a tactical 'sell' call by fund managers as they have been maintaining a 'buy on dips' strategy for the last few months. 

As on 31 December, 2014, mutual fund industry had equity assets under management(AUM) of Rs 3.2 lakh crore - the highest in its history. The sector offers over 400 equity related schemes to investors. Of late there has been a surge in close-ended schemes. Nearly 80 new close ended schemes hit the market over the last one year.