Mutual funds remain net buyers in June

MUMBAI: Despite a slump in equity markets, mutual funds continued to be net buyers in the secondary equity market in June. They bought equities worth Rs 31.79 billion as against a net buy position of Rs 0.64 billion in May, according to a report by CRISIL Fund Services.

This is the third month in a row that mutual funds have been net purchasers in secondary market, indicating that fund managers are finding value in stocks, which are looking under-priced in the current bear phase.

Until June 30, mutual funds have made net equity purchases of Rs 76.14 billion.

���All the chief investment officers are willing to enter equities now owing to attractive valuation,��� said Hiren Dhakan, research analyst, Bonanza Portfolio, adding that LIC was planning to enter equities between 12,800 and 13000 levels on the Sensex.

During June, Indian mutual fund industry's average AUM slid by almost 6 per cent to Rs 5.66 trillion, from the record high of Rs 6.02 trillion in May (including fund of funds). The decline in assets can be attributed to the slump in equity markets (Nifty down 17%) and tight liquidity conditions after advance tax outflows of almost Rs 250 billion.

However, asset under management of equity mutual funds fell 24 per cent while the benchmark S&P CNX Nifty fell by 34 per cent in the first six months of the year.

���The AUMs of equity funds falling lesser than the benchmark indices is a sign of increasing maturity of investors. Investors now seem to be looking to buy at lower levels,��� said Krishnan Sitaraman, head ��� fund services & fixed income, CRISIL.

Explained Bonanza���s Dhakan, ���under the current scenario, falling net asset values should be viewed with increase in corpus of fund houses.���

The CRISIL Fund Services report says, in the 3-month period April to June 2008, funds with a global equity component figured at the top, viz., Principal Global Opportunities Fund (8.28% absolute return), HSBC Emerging Markets Fund (5.03%) and Birla Sun Life International Equity Fund - Plan A (4.59%).

At the same time, on one and six month horizon as of June, Birla Sun Life International Equity Fund - Plan A was the best performing scheme among internationally oriented equity funds with returns of -5.8 per cent and -3.1 per cent respectively.

The volatile equity market saw arbitrage funds as positive return generators in June among equity oriented funds, with JM Arbitrage Advantage Fund topping the charts with 0.87 per cent absolute return followed by HDFC Arbitrage Fund at 0.78 per cent.

Benchmark Equity & Derivatives Opportunities Fund (0.75% return), SBI Arbitrage Opportunities Fund (0.74%) and Lotus India Arbitrage Fund (0.65%) were the other schemes in the top five gainers list.

Reliance Mutual continued to be the largest fund house with an average asset base of Rs 908.13 billion. ICICI Prudential Mutual Fund and HDFC Mutual followed with average assets of Rs 595.05 billion and Rs 527.11 billion respectively. UTI Mutual Fund and Birla Mutual Fund were at fourth and fifth positions with an average AUM of Rs 507.70 billion and Rs 410.93 billion respectively.