Domestic MFS step up buying as stock markets wobble

Domestic mutual fund (MF) managers stepped up purchases in November as the markets witnessed their steepest fall since March 2020. Equity MFS bought shares worth ~19,258 crore, the most since July.

MF participants say corrections in the Indian markets gave some opportunities to enter at a lower level. In November, S&P BSE Sensex went down by 3.8 per cent, while S&P BSE Midcap index declined 2.33 per cent.

MF buying acted as a counterbalance to the sharp outflows by foreign investors, particularly in the previous 6-7 trading sessions, when they have yanked out over ~25,000 crore amid concerns around the new Covid-19 variant and policy normalisation measures taken by central banks.

G Pradeepkumar, chief executive officer of Union AMC, says, “There were many investors who had earlier booked profits and were waiting on the sidelines. With markets witnessing a correction, we saw investors again start investing in equity funds. Even as valuations even now look a bit stretched, but Indian long-term growth story is intact and investors are investing with a long-term view.” In October, the flows into equity funds slowed as investors booked profits at higher levels. Equity funds had seen net inflows of ~5,214 crore in October compared to ~8,677 crore in September. Market participants also say the slowdown in October was because there were no new fund offers (NFOS). In the last few months, the industry had launched a series of new equity funds and had collected record amounts through NFOS.

Since July, fund houses have raised over ~27,151 crore from NFOS in equity funds. The amount increases to ~57,000 crore in the last four months if NFO numbers are taken for all the categories of schemes.

However, inflows coming through systematic investment plans (SIPS) is one of the major comforts for the MF industry. In September and October, the SIP monthly contribution was over ~10,000 crore. In the current financial year, inflows through SIPS have been over ~66,973 crore. Swarup Mohanty, CEO, Mirae Asset Investment Managers (India), said: “There was an expectation that at every dip the industry would continue to get the money and deploy it in the market. Apart from that, the SIP book has remained strong and enabled such investments by equity funds.”

However, certain participants have turned sceptical over the rising equity markets. They fear that if there is a deeper correction and volatility in the markets, several investors will exit the funds and redemptions will rise.