Mutual funds slow down pumping money in stocks in May

After pouring in the largest sum in shares at the start of the current financial year, India's fund managers have reduced their pace of investment in stocks. Industry experts say it's tactical call and not a directional one. They add that it is a continuation of "buy on dips" strategy.

Thus far this month, in the 16 trading sessions, equity fund managers have net invested about Rs 3,300 crore - which is nearly a third of what the previous month witnessed. Compared to the immediate previous month, the quantum of net investment is low but is in line with the average monthly investments ever since the Narendra Modi-led BJP government took office in New Delhi last year.

Three more trading sessions are yet to come in May. In April, the net investment stood at Rs 9,244 crore, which was unusually high given the robust inflows as key indices corrected about 10%.

According to fund managers, it is a tactical call and should not be read as directional. It has come at a time when corrections in the key indices appear to have been arrested to some extent. Rather, the benchmark indices are showing some resilience and are up about 2% compared with April-end. In the recent past too, fund managers had reduced their buying spree whenever markets moved up.

G Pradeepkumar, CEO of Union KBC Mutual Fund, says, "Since the start of the current rally, fund managers have been aggressively buying on dips. Last month, when markets witnessed corrections, we have been buyers. Further, strong inflows in the equity segment also fuelled investments."

Another possible reason for a slowdown in investments could be a relatively less robust inflows in equities from investors. Though the monthly statistics will be know only early next month, sector's executives say reduction in inflows cannot be ruled out when some uncertainty comes in.

Rajiv Shastri, managing director & CEO of Peerless Mutual Fund, says, "Slowdown in inflows could be a possibility. When situation looks a little uncertain investors tend to hold back their investments."

The Reserve Bank of India (RBI)'s next policy review on June 2 is also being eyed by fund managers as the next decisive trigger. According to them, it is to be seen how RBI moves as there appears to be visible pressure from the Government for an imminent rate cut.

In FY15, the total net investments by fund managers were to the tune of about Rs 41,000 crore - highest in sector's history with net inflows for the year at Rs 71,000 crore.

Nearly 10% correction in stock indices post the Union Budget against the recent peaks were taken as big opportunities by the fund managers to pick stocks. Even investors increased investments during March-April period which were as high as Rs 19,000 crore.

Currently, the industry has over 400 equity oriented schemes managing assets worth Rs 3.45 lakh crore.

Business Standard
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