MFs kick off June on low note

Domestic funds' net sales topped an all-time high at Rs 2,053 crore in the first 10 trading days of the current month.

This signifies a sharp reversal of the domestic funds' stance as they bought net Rs 7,718 crore worth of equities last month. Earlier, in June 2005, the mutual funds' net sales were a record Rs 1,785 crore.

In the first 10 trading days of the current month, domestic funds bought shares worth Rs 3,063 crore and sold shares worth Rs 5,117 crore. Mutual funds were net sellers on the bourses for the third time in the current calendar year. They had sold shares worth Rs 1,193 crore in January and Rs 179 crore in February.

"It is not surprising. When funds face redemption pressure, they would need to sell stocks in the market. In May, when FIIs were selling, domestic funds were buying. But they do not have the muscle to sustain the buying spree," said a fund manger.

Despite this, domestic funds' net purchases in the current calendar year was Rs 11,741 crore, of which buy orders stood at Rs 68,058 crore and sell orders of Rs 56,316 crore. In the current calendar year 2006, funds' net buys topped Rs 4,474 crore in March, Rs 2,975 crore in April and Rs 7,719 crore in May.

As per information available from the Securities and Exchange Board of India (Sebi), mutual funds were net sellers in aggregate terms for almost five years between November 2000 and August 2005. Only during the September 2005, they built up aggregate net buy position.

Domestic funds heightened their activities after the market started moving northwards in May 2004. Net buying in the market topped Rs 1,096 crore in May 2004; Rs 6,383 crore between March and May 2005; Rs 9,499 crore between July and November 2005; and Rs 15,168 crore during March April and May 2006.