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Mutual fund managers have begun the year on a cautious note. They have applied brakes to their stock market investments in January, after pumping in record amount of money in the last seven months.
Equity fund managers’ investment in stocks hit the lowest in January ever since Narendra Modi-led BJP government came in power in May last year. According to statistics available from the Securities and Exchange Board of India (Sebi), the MFs’ total net investments in stocks declined to Rs 880 crore - an eight-month low. In the previous month, the figures stood at a little over Rs 7,000 crore.
In the last few trading sessions, they sold shares worth Rs 1,600 crore amid a sharp rally which saw the benchmark indices climb 8 per cent in just 10 sessions.
S Naren, chief investment officer (CIO) of ICICI Prudential Mutual Fund, said, “Markets are trading at all-time highs. The coming Budget is going to be critical. I think the buy-on-dips strategy is still being followed. Indian investors are still under-invested in stocks but markets are not very cheap now.”
Fund managers were seen maintaining their buying stance during initial part of the month but they seemed to have decided to take some money off the table following the sharp gains that market saw after the Reserve Bank of India (RBI) unexpectedly cut interest rate by 25 basis points in the middle of the month.
The profit-taking came even as equity schemes continue to saw robust investor flows of over Rs 5,000 a month. Some fund managers say the markets ran ahead of their fundamentals in January. They said markets looked over-heated with the Nifty almost touching the 9,000-mark.
“At this pace, markets will start discounting 2017-18 earnings soon. This is quite healthy and correction looks inevitable,” said chief investment officer (CIO) of a foreign fund house.
G Pradeepkumar, CEO, Union KBC Mutual Fund, “By January-end, markets ran too high and too soon. There is a fear that markets may see corrections. Market participants may have used the opportunities to set aside some cash to use it when opportunities come up. The recent selling could be just a tactical call to sell high and buy low.”
The buying surge by fund managers in recent months is on the back of inflows of nearly Rs 50,000 crore into equity schemes in the current financial year. As on December 2014, mutual fund industry had equity assets of Rs 3.2 lakh crore — highest in its history.
