MFs step up buying amid market fall

Flush with cash, fund managers continue with their 'buy on dips' mantra

The 'buy on dips' strategy continues to be the mantra of India's equity mutual fund managers. Flush with cash, domestic fund managers continued to be strong buyers, even as foreign institutional investors (FIIs) cashed out.
 

According to statistics available with the Securities and Exchange Board of India (Sebi), fund managers have already pumped over Rs 9,000 crore into stocks so far this month. Domestic mutual funds (MFs) are said to have intensified their buying in the last two trading sessions, when the benchmark indices came off nearly three per cent.

Fund managers told Business Standard they stepped up buying as the latest correction provided an opportunity to buy several stocks. But, they maintained, these were stock-specific calls in counters that have corrected much more than the broader market.

"There have not been any major corrections in recent months which could erode, say, a tenth of the market value. In case that happens, it will be a healthy correction and one may look at buying…. Having said that, beyond a point, fund managers can't wait to buy. We need to deploy cash in markets at corrections as inflows continue to remain strong," said Mahesh Patil, co-chief investment officer (CIO) at Aditya Birla Sun Life Mutual Fund.
 

According to Patil, "We would continue with the strategy of buy on dips. But these are mostly stock-specific activities as some counters offer value buying during such corrections. At the same time, we remain cautious at these times and can't afford to get carried away."
 

Counters which have seen the most buying this month includes ICICI Bank, Sun Pharma, HDFC Bank and HDFC. Apart from these, issues such as ICICI Lombard, SBI Life and other initial public offerings (IPOs) have also taken away a substantial chunk of MF investments.
 

Over the past two-quarters, fund managers have repeatedly been passing commentaries that it is increasingly becoming difficult to find value in the market. Further, their prime advice to investors has been consistently on lowering their return expectations.
 

Interestingly, despite carrying a cautious view on the markets for nearly a year now, funds have continued to give high double-digit returns.

Illustration: Ajay Mohanty

So far this year, inflows in equity schemes have been to the tune of Rs 81,000 crore — the highest in such a short span of time. Fund managers have deployed over Rs 75,000 crore in stocks.

Currently, the total equity assets under management stands at over Rs 7 lakh crore — including balanced funds. This works out to be around a third of the total industry' asset size of Rs 20 lakh crore.