MFs turn net sellers in April, offload equities worth Rs 5,100 crore

Mutual funds (MFs) turned net sellers of equities in April amid a run up in stock prices on sustained inflows from foreign portfolio investors (FPI).

The benchmark indices, Sensex and Nifty50, logged their biggest monthly advance since November last year, gaining 3.6 per cent and 4.1 per cent last month.

Data from the Securities and Exchange Board of India (Sebi) shows that MFs sold equities worth over Rs 5,100 crore in April, the highest since February 2021. This is only the second month in the last two years when MFs have been net-sellers on a monthly basis.

Prior to April, MFs were on an equity buying spree as they invested a net amount of Rs 55,000 crore during the January to March 2023 period. The number was more than double the amount deployed in the preceding three months (October to December 2022). Owing to the consistent buying, cash levels at certain fund houses had seen a decline in March.

The buying came on the back of improved valuations and favourable economic indicators.  The 12-month trailing price to earnings ratio (PE ratio) of Nifty50 had declined to 21 in March from a high of 32 at the end of September 2021.

MFs resorted to selling at a time when the foreign investors are showing a change in stance after being net sellers in most months of the 2022 calendar year.

In April, they poured in over Rs 10,000 crore for a second month in a row as risk sentiment improved after regulators prevented a banking crisis in the developed world.

The strong inflows from foreign investors helped India outperform all the major global markets in April with the Nifty50 rising 4.1 per cent. Prominent indices of UK and Japan posted the next higher increase of 3.1 per cent and 2.9 per cent, respectively. Taiwan and Hong Kong markets were down 1.8 per cent and 2.5 per cent, respectively.