MFs buy on dips in September

Turn net-buyers in the second half of the month as market corrects

 

This month, equity mutual fund managers stuck to a ‘buy on dips’ strategy. During the first half of the month, when benchmark indices rose to new highs, these managers took some money off the table; they returned as strong buyers when the market entered a correction mode, during a meeting of the US Federal reserve and after the Supreme Court’s verdict on coal block allocations.

In the large-cap space, stocks such as State Bank of India, Bank of Baroda, ICICI, L&T, Tata Steel, Coal India and Hindalco witnessed sharp corrections after the apex court cancelled the allocation of 214 coal blocks. Fund managers said the correction presented a good buying opportunity in certain value stocks.

In the first half of this month, fund managers, net buyers since May, sold stocks. Experts termed this a tactical call to set aside cash to be used in case of better opportunities.

Through the last nine trading sessions, equity fund managers bought shares worth Rs 3,540 crore, investing Rs 100-500 crore on a daily basis. However, they pumped a whopping Rs 1,300 crore on a day when the BSE Sensex fell to an intra-day low of 26,220, about five per cent off its peak.

 

“We are positioning our schemes for a reasonable return environment towards domestic cyclical sectors. Leveraging on the economic revival, domestic cyclical sectors could offer a potential upside,” says S Naren, chief investment officer, ICICI Prudential AMC. “There is a huge play available for equity markets, with earnings likely to improve.”

Niranjan Risbood, director (fund research) at Morningstar India, said, “The profit-booking earlier this month was a tactical call, as valuations of several stocks were far too stretched. It should not be seen as a strategic change, as there is a long-term bullish view on India.”