MFs become net buyers of equity
MFs which were holding cash tightly now become net buyers of equity as mkts corrected sharply in beginning of March. When to jump an MF? | Paperwork for MF!
By M Allirajan, TNN |
COIMBATORE: Mutual funds (MFs), which were holding cash rather tightly, seem to be warming up to the markets slowly. They have now become net buyers of equity for the first time in three months even as the markets continued to rise on expectations that a stable government and stimulus packages would arrest the economic downturn.
Fund houses net bought (higher gross purchases over sales) equity to the tune of Rs 1,477 crore for March, data with the Securities and Exchange Board of India (Sebi) shows. This is the highest since September when the markets tanked following the global crisis. In September, MFs net bought equity amounting to Rs 2,292 crore.
���Markets had corrected quite sharply in the beginning of March. People started putting money in March-end as valuations were looking attractive ,������ explains R Srividhya , vice-president , equity, Sundaram BNP Paribas MF. With the dollar also depreciating , emerging markets have started to do well.
���MFs are slowly participating in the rally,������ says a senior official with a fund house. Incidentally, fund houses are bullish on debt as well. They net bought debt instruments amounting to Rs 17478 crore in March, the second highest since September.
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However, given the uncertainties , fund managers are quite cautious about the outlook . ���Fund houses are deploying money. But it is not very aggressive,������ says Krishna Sanghvi, vice-president , equity , Kotak Mahindra MF. ���There is still a lot of uncertainty . Several issues remain unaddressed.������ MFs also seem to be in no hurry to cut cash levels drastically either. ���Cash holdings may have come down in March. But it is not huge,������ says a senior official. Cash holdings of diversified equity MFs rose to 21.7% of the total net asset value of funds, the highest since last April.
���It is still not clear whether this (rally) would sustain. So, we are still in a wait-and-watch mode,������ say officials with fund houses. ���Markets expect the government to drive the economy forward. From an economic perspective elections have been a historically relevant event,������ says Sanghvi.
���A lot would depend on the election results. Markets would definitely look up if there is a stable government,������ says Srividhya. Though the current market rally has been driven by an expected improvement in the global economy , annual earnings and the nature of poll results would determine whether the upturn would continue, say officials.
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