Mutual funds soak up stocks

Investments in May at all-time high; FIIs were net sellers.

Mutual funds are setting a scorching pace in the equity markets. Net investments in May touched Rs 3,321.76 crore, the highest ever made by the industry in a single month and more than double the previous highest of Rs 1,603 crore in March 2005.

Foreign institutional investors were net sellers in May to the tune of Rs 807 crore compared with Rs 1,047.10 crore in the previous month. In April, the mutual funds made a net investment of Rs 1,457.23 crore.

The cumulative investment by mutual funds in the equity markets in the first five months (January to May) of the calendar year was Rs 6,964 crore against an outflow of Rs 751.83 crore in 2004. FIIs have pumped in Rs 14,727.5 crore this year.

"Mutual funds had mobilised large amounts in the last six months through initial public offers. A bulk of this money is now flowing into the equity markets. They were waiting for an opportunity, which came when the Sensex fell early last month," said a market analyst.

Mutual funds were net buyers of over Rs 50 crore on each trading day in May. During the month, the Sensex gained by 9.11 per cent (560.67 points) to close at 6715.11.

Of the 22 trading days last month, mutual funds invested more than Rs 200 crore in equities on six days. The investments were Rs 100-200 crore on eight days and Rs 50-99 crore on six days.