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Mutual fund managers have reduced their pace of buying this month, amid sharp rise in volatility. After pumping in more than Rs 9,000 crore in Indian stocks in April, fund managers have bought shares worth around Rs 3,300 crore so far this month. The drop in investment pace, industry players, say is a tactical call and not a directional one. They add that it is a continuation of "buy on dips" strategy.
Thus far this month, in the 16 trading sessions, equity fund managers have net invested about Rs 3,300 crore, which is nearly a third of what the previous month witnessed. Compared to the immediate previous month, the quantum of net investment is low but is in line with the average monthly investments ever since the Narendra Modi-led BJP government took office in New Delhi last year.
The investment figure in last month was unusually high after the market had come off nearly 10 per cent from the highs.
According to fund managers, it is a tactical call and should not be read as directional. It has come at a time when corrections in the key indices appear to have been arrested to some extent. Rather, the benchmark indices are showing some resilience and are up about two per cent compared with April-end. In the recent past too, fund managers had reduced their buying spree whenever markets moved up.
G Pradeepkumar, CEO of Union KBC Mutual Fund, says, "Since the start of the current rally, fund managers have been aggressively buying on dips. Last month, when markets witnessed corrections, we have been buyers. Further, strong inflows in the equity segment also fuelled investments."
Another possible reason for the slowdown in investments could be relatively less robust inflows in equities from investors. Sector executives say reduction in inflows cannot be ruled out in May. Rajiv Shastri, managing director & CEO of Peerless Mutual Fund, says, "Slowdown in inflows could be a possibility. When situation looks a little uncertain, investors tend to hold back their investments."
The Reserve Bank of India (RBI)'s next policy review on June 2 is also being eyed by fund managers as the next decisive trigger. According to them, it is to be seen how the RBI moves as there appears to be visible pressure from the government for an imminent rate cut.
In FY15, the total net investments by fund managers were to the tune of about Rs 41,000 crore, the highest in sector's history with net inflows for the year at Rs 71,000 crore.
Nearly 10 per cent correction in stock indices post the Union Budget against the recent peaks were taken as big opportunities by the fund managers to pick stocks. Even investors increased investments during the March-April period, which were as high as Rs 19,000 crore.
Currently, the industry has over 400 equity-oriented schemes managing assets worth Rs 3.45 lakh crore.
