Domestic mutual funds (MFs) invested Rs 5,548 crore ($1.14 billion) in oil & gas, metals, power, auto and information technology stocks in July, according to a report by Mumbai-based brokerage house Net Worth Stock Broking.
In contrast, the five sectors that saw the maximum outflow of MF money in the month were banks, pharmaceuticals, engineering, finance and shipping. MFs sold stocks worth Rs 1,636 crore ($337.3 million) in these sectors, indicating what experts say is a high level of sector rotating to gain from the volatility in the market.
ONGC, Sterlite Industries, Tata Consultancy Services, NTPC and ITC were the top five stocks purchased by MFs. ONGC saw a net increase in exposure by Rs 1,205 crore ($248.5 million). The top five stocks sold by MFs were RIL, IDFC, Larsen & Tubro, Cipla and HDFC Bank. MFs decreased their net exposure in RIL by Rs 998 crore ($205 million) during the period.
“Sector rotation by MFs has increased due to high volatility in markets. While valuations in the oil and gas sector were cheap, power stocks were in focus mainly due to the initial public offers by Adani Power and NHPC. Similarly, information technology (IT) saw a boost in inflows as the third-quarter results of IT companies were good. The global rally in commodities and improvement in consumer confidence is behind the rise in investments in metal and auto sectors,” said Sameer Narayan, head of equities at Fortis Investments, which manages over Rs 10,000 crore in equities.
During July 2009, the total equity assets under management (AUM) of the MF industry rose 5.29 per cent, while the broader equity benchmark index, Nifty, moved up by 8.05 per cent.
Cash levels of MFs in equity funds increased 2.19 per cent to Rs.25,167.2 crore ($5.19 billion) from Rs. 24,628.2 crore ($5.08 billion). The overall equity cash level of the industry is 14.6 per cent of the total AUM. However, the equity plus debt cash level saw a massive increase of 92.1 per cent in July to Rs 70,465.9 crore ($14.52 billion).
According to Sanjay Sinha, chief executive officer (CEO) of DBS Chola MF, unattractive yields at the end of July was the main reason MFs did not invest in debt schemes. “A majority of inflows into debt schemes of MFs in July came in the last week of the month, when yields on debt papers were lower.”
