Debt market purchases by MFs hit the roof

Contribution to the NSE debt market turnover shoots up.

Domestic mutual funds made record purchases of debt securities, running into a gross total of Rs 1,116 crore, on August 6, 2004. Data for Friday were released on Monday by the Securities and Exchange Board of India (Sebi).

This is for the first time that domestic funds' gross purchases in the debt market have crossed Rs 1,000 crore on a single trading day.

On a net basis, which takes into account sales, funds picked up debt securities worth Rs 945 crore. The earlier highest gross investment by mutual funds on a single day was Rs 657 crore on October 30, 2002.

On Friday, mutual funds' turnover accounted for 57.5 per cent (Rs 1,286 crore) of the total turnover of the wholesale debt market of Rs 2,237 crore on the National Stock Exchange (NSE). Normally, the turnover of mutual funds accounts for 10-25 per cent of the total debt market turnover.

With Rs 945 crore net purchases on Friday, the cumulative net purchases by mutual funds in the debt market touched Rs 1,184 crore in August 2004. But fund managers said they did not know of a single fund house that had made purchases in the secondary market.

The high purchase figures could have been due to a couple of fund houses making purchases in the primary market, they reasoned.

Since the beginning of 2004, mutual funds have been more active in the debt market than in equity.

Between January and July, funds were net sellers only in February and June. In February, they were net sellers of Rs 168 crore worth of debt paper, while in June they sold debt securities worth Rs 1,046 crore on a net basis.

Funds were net buyers in January 2004 (Rs 1,746 crore), in March (Rs 1,752 crore), in April (Rs 2,108 crore) and in May (Rs 798 crore). In July, they had a lower net investment of Rs 187 crore.