MFs up derivatives exposure to hedge against uncertainty in equity markets

Share of equity derivatives as percentage of equity AUM at over three and a half year high

Mutual funds (MFs) have bought a large chunk of derivatives to hedge against the increasing uncertainty in equity markets. The data with the Securities and Exchange Board of India (Sebi) shows that MFs bought Rs 228 billion worth of equity derivatives in August. At 2.2 per cent of MFs’ equity assets, the share of equity derivatives was the highest in more than three-and-a-half years. The last 12-month average stood at 1.35 per cent.

“The rise in derivatives exposure is on account of the sharp spike in market volatility. Uncertainty in the markets has gone up due to the ongoing currency