MFs step up buying as markets wobble, equity scheme purchases at 4-mth high

Participants in mutual funds say corrections gave some opportunities to enter at lower levels. In November, S&P BSE Sensex lost 3.8%, while S&P BSE Midcap shed 2.33%

Domestic mutual fund (MF) managers stepped up their purchases in November as the markets dropped to their lowest in 21 months. Equity MFs bought shares worth Rs 19,258 crore, most since July.

Participants in the mutual funds say that corrections in the Indian markets gave some opportunities to enter at a lower level. In November, S&P BSE Sensex went down by 3.8 per cent, while S&P BSE Midcap index declined by 2.33 per cent.

MF buying acted as a counterbalance to the sharp outflows by foreign investors, particularly in the previous 6-7 trading sessions when they have pulled out over Rs 25,000 crore amid concerns around the new Covid-19 variant and policy normalisation measures taken by central banks.

G Pradeepkumar, CEO Union AMC says, “There were many investors who had earlier booked profits and were waiting at the side-lines. With markets witnessing correction, we saw investors again start investing in equity funds. Even as valuations even now look a bit stretched, but Indian long term growth story is intact and investors are investing with a long-term view.”

In October the flows into the equity funds had slowed down as investors continued to book profits at higher levels. Equity funds had seen net inflows of Rs 5,214 crore in October compared to Rs 8,677 crore in September.

Market participants also say that the slowdown of flows in October was because there was no new fund offer (NFOs) in the market during that month. In the last few months, the industry had launched a series of new equity funds and had collected record amounts in the NFOs.

Since July, fund houses have raised over Rs 27,151 crore from the NFOs only in the equity funds. The amount further increases to Rs 57,000 crore in the last four months if NFOs numbers are taken for all the categories of schemes.

However, inflows coming through systematic investment plans (SIPs) is one of the major comforts for the mutual fund industry. In October and September, the SIPs monthly contribution was over Rs 10,000 crore. In the current financial year inflows through SIPs have been over Rs 66,973 crore.

Swarup Mohanty, CEO, Mirae Asset Investment Managers (India) said, “There was expectation that at every dip, industry would continue to get the money and they would deploy the same in the market. Apart from that SIP book has remained strong and enabled such investments by equity funds.”

However, certain participants have turned sceptical over the rising equity markets. They fear that if there is more correction and volatility in the markets, several investors will exit the funds and redemptions would go up.