MF buying cushions foreign portfolio investors selling blow, shows data

Domestic mutual funds (MFs) pumped in nearly Rs 20,000 crore into domestic stocks in April. The deployment helped cushion the blow from foreign portfolio investors selling over Rs 28,600 crore.

An analysis by Edelweiss Alternative Research shows fund managers invested large sums in blue-chip stocks, such as Reliance Industries, Infosys, ICICI Bank, and SBI Cards, in April. Some of these stocks have seen sharp corrections this month.

Money managers also tried to take money off the table in counters such as NTPC, HDFC Life Insurance Company, and Adani Ports and Special Economic Zone (SEZ), taking advantage of the big move in these stocks. This strategy played out well, as stocks, such as Adani Ports and SEZ and NTPC, saw sharp fall in May.

Experts say while one extrapolates much from month-on-month buying patterns of MF managers, they still offer an indication of companies on money managers’ radar. 

A sharp fall in the market, coupled with sustained inflows into equity schemes, has provided fund managers a good opportunity to invest in companies with sound fundamentals at reasonable valuations.