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India's equity fund managers have made good use of the recent corrections in stocks by pumping more cash into equities. Their cautious call in November and tactical decision to sit on cash for some time paid off when the markets tanked in December.
As a part of their 'buy on dip' strategy, fund managers have bought shares worth Rs 4,678 crore so far in the current month. The net amount invested is nearly three times more than what they pumped in the previous month, when stock indices traded at historical highs.
The month, at one point of time, saw a correction of about seven per cent in key indices, which translated into a fall of nearly 600 points for CNX Nifty and about a 2,000 point decline in the Sensex.
Interestingly, at least on two occasions in recent trading sessions, fund managers were net buyers by nearly Rs 1,000 crore in each trading sessions, a rare event for domestic asset managers. In fact, there were merely three such heavy investment days prior to December when net investments were above Rs 1,000 crore - one each in July, August and September.
Fund managers repeated this again in the current month on days when indices either dipped heavily or had a very volatile sessions with a downward bias.
For instance, on December 8 when the CNX Nifty lost 100 points on a closing basis, asset managers' net investments stood at Rs 945 crore. The second was on December 17 when the broad-based Nifty tumbled 100 points to slip below the psychological mark of 8,000. Fund managers used the opportunity to go an extra mile and pumped a massive Rs 1,023 crore in stocks.
S Naren, chief investment officer of ICICI Prudential Mutual Fund, country's second largest fund house, said, "The recent correction has been on account of global factors, such as the sharp fall in crude oil prices and concerns regarding growth in China and euro zone. Most Indian investors have been looking forward to a correction because they are still under invested in equity and the correction gives them an opportunity to consider investing."
According to him, India is the most attractive emerging market in the world and, therefore, any correction due to global cues is an opportunity for people to invest for the long-term in Indian equities.
It is interesting to note that in the previous month, fund managers had reduced their pace of investments substantially, as markets were uncomfortably high. Against an average monthly net investment of Rs 5,000 crore since June, November could see an investment of only Rs 1,677 crore, despite having a continuous strong inflows in equity segment.
Fund managers had termed their caution as a tactical call, as they felt the markets were running far ahead of the fundamentals and some corrections looked inevitable. But more than five per cent correction was something many had not envisaged. Fund managers saw an opportunity during the fall earlier this month.
Jimmy Patel, chief investment officer of Quantum Mutual Fund, said: "We had been sitting on reasonable cash levels for some time now. With the recent corrections scrips which have come down to reasonable valuations are on our radar."
So far this financial year, equity MFs have bought shares worth Rs 29,200 crore, highest ever in the sector's history.
