Mutual funds stepped up equity buying in May after a lacklustre April

Mutual funds ramped up equity purchases in May, deploying fresh inflows and capitalising on a market pullback after a cautious April

Mutual funds (MFs) significantly increased equity purchases in May after adopting a relatively cautious stance in April, taking advantage of the market pullback to deploy fresh money. MFs bought equities worth nearly ₹63,000 crore in May, around 2.5 times the amount invested in April. 

Benchmark indices ended May lower, with the Nifty 50 and Sensex declining 1.9 per cent and 2.8 per cent, respectively. The weakness followed a strong rebound in April, when both indices had surged more than 6 per cent. 

The value of equities purchased by MFs in a month is seen as a key indicator for the industry’s net inflows. Equity MF schemes continued to attract robust investor interest, recording inflows of nearly ₹40,000 crore each in April and May. 

 

Monthly equity puchases by MFs are influenced by a range of factors beyond net inflows into active equity schemes. Changes in cash balances, flows into passive and hybrid funds, and portfolio rebalancing all affect deployment levels. In particular, changes to the equity allocation of hybrid schemes can have an impact on the overall volume of equities bought by the industry.