Mutual funds turn net buyers of stocks after two months

Equity fund managers turned net buyers in of stocks in August, after two months. Collectively, they bought shares worth Rs 1,908 crore till August 30, according to data from the Securities and Exchange Board of India.

Reversal of mutual fund (MF) flows into stocks indicates the redemption pressure on fund managers, seen since March, has reduced, say experts. The amount of purchase, however, isn’t high compared to their average monthly buying in the past two years.

According to fund managers, the past few months have seen redemption by lumpsum investors and a steady decline in investments through that route. "Now, it's mostly the systematic investment plan (SIP) money coming in, which is stickier, giving us confidence to deploy cash into stocks," said the investment head of a mid-size foreign fund house.  

Another factor which has helped curb the redemption, managers, say, is better spread of the monsoon, stoking confidence among investors of better growth in stocks. The monthly SIP book has reached nearly Rs 3,500 crore, ensuring a consistent inflow of about Rs 40,000 crore in stocks through MFs in a year.

Further, there was no steep volatility in the benchmark stock indices during the month, which could trigger panic among investors. This augured well for fund managers and they pumped funds in stocks. The benchmark BSE Sensex closed 1.4 per cent or about 400 points up at end-August and the range the index traded was quite narrow.

The Association of Mutual Funds in India will release the monthly statistics regarding inflows and redemptions next week. On a gross level, fund managers bought stocks worth Rs 27,243 crore in August. However, this was countered by gross selling of shares worth Rs 25,430 crore.

Currently, there are nearly 3.6 million equity folios. The number of individuals is around 10 million. The total of equity assets under management was Rs 4.5 lakh crore as on July 31.