MFs have displayed a positive bias for equities this year

Low stock valuations provide the pull factor

Mutual funds seem to be cautiously inching their way in the equities markets.

Overturning the previous trend of being net sellers of equities almost in every month except May 2004, mutual funds have so far been net buyers during the current month.

According to the figures available on the Securities and Exchange Board of India (Sebi) website, during September so far, funds have pumped in Rs 183.88 crore into the equities markets on a net basis.

Market analysts said that it was the low stock valuations which are attracting them. "Plus, a whole lot of new equity schemes have hit the markets and these funds are making fresh purchases," they pointed out.

Mutual funds, which have always followed a defensive attitude towards investing in the stock markets - barring a few intrepid fund houses - ended fiscal 2004 with a net purchase figure of Rs 1,308 crore.

For the previous four financial years, funds had ended with a net deficit each year. However, 2003 was a year of unprecedented boom for the equity market and this could have resulted for the funds' shopping spree.

However, the funds selling started right off with the very first month in the current fiscal and in April, funds notched up a net sales figure of Rs 219 crore.

In May, which saw the infamous Monday fall on the 17th, fund houses took the opportunity to buy stocks at the levels available and stock up their portfolios.

In May 2004, funds were net buyers to the tune of Rs 1,005 crore. However, they have consistently been net sellers after that though the market has been trading in a fairly narrow range with a few brief volatile sessions.

In September so far, the markets have been largely buoyant and inching up every day. In contrast with their equity market operations, mutual funds have always maintained their positive bias in the debt mart and in every month - barring June - they have ended on a positive note.