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Domestic mutual funds (MFs) have extended their investment spree for a record 16th straight month.
Fund managers pumped in Rs 10,017 crore in August, the second highest infusion by them in a single month, according to data with the Securities and Exchange Board of India. Foreign institutional investors (FIIs) reported a record net outflow in the month.
The S&P BSE Sensex shed 6.5 per cent, its sharpest monthly fall since November 2011, when the benchmark gauge had declined 8.9 per cent in a single month.
MFs have been buyers in the domestic market in every month since May 2014, when the Narendra Modi-led Bharatiya Janata Party won the Lok Sabha polls with a majority. The average buying for this 16-month period has been around Rs 5,000 crore.
Fund managers were stepping up their buying even when the market went through turbulence. In June, for instance, they made a net investment of Rs 10,320 crore, the highest single-month purchase since data became available with the market regulator, since January 2000. The month’s buying helped Indian markets outperform other Asian and emerging market peers, roiled by the crash in the China stock market.
Since May 2014, the MFs have put in Rs 81,269 crore in Indian equities. The buying has been backed by robust investor flows into equity schemes.
Harsha Upadhyaya, chief investment officer-equities, Kotak AMC, said: “MF inflows are clearly driven by the flows we are getting into equity schemes. Indian investors are putting money in MFs. Our strategy is to look for opportunities in a falling market. So, whenever we get such opportunities, we are using them.”
Fund managers have remained largely unperturbed by the weakness in the market this year. So far in 2015, MFs have seen a net inflow of Rs 47,686 crore, even as the Sensex is down nearly five per cent. Domestic brokerage Ambit in a recent report expressed concern over the strong retail flows into the equity market. “This confidence appears misplaced in the light of the underlying performance exhibited by corporate India,” it said.
Adding: “The last time corporate India had such a poor performance in terms of revenue and profit growth was during the 2008 financial crisis, the year that had seen the Sensex drop by more than half of its peak. Today, however, in spite of such an abysmal performance, Indian equities have remained afloat, helped by retail investor optimism. In contrast, over the past six months, FII equity flows into India have dried (average monthly outflow of Rs 2,000 crore from FIIs vs average monthly inflow of Rs 6,000 crore from MFs over the past six months).”
If the buying momentum continues, domestic MFs will be net buyers of equities for a second straight calendar year. In previous years, MFs had sold a net amount of Rs 20,860 in 2012, followed by Rs 21,082 crore in 2013 and had net-bought shares worth Rs 23,135 crore in 2014.
