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Fund managers have begun treading cautiously following the sharp gains in stocks in recent months. They have turned tight-fisted with investments in shares at a time when key stock indices are trading at historical highs. Uncomfortable with the steep rise in recent months as stocks trade ahead of fundamentals, fund managers have taken a tactical call to sit on cash for the time being.
In November, the total net investment by equity mutual fund schemes in stocks fell to a six-month low of Rs 1,677 crore. The inflows were a fraction of the nearly Rs 6,000 crore invested in October. G Pradeepkumar, chief executive officer (CEO) of Union KBC Mutual Fund, said: “Fund managers have simply taken a pause. It's a tactical strategy as one can't sit on cash for too long. There could be opportunities where one can buy on dips, though many rule out a sharp correction in stocks.”
According to a chief investment officer with one of the largest fund houses, this should be seen as “an aberration”. He adds, “Investment managers are also trimming their exposure in some stocks and sectors which ran too much. This may have resulted into a decline in terms of net investments."
Fund managers were on a selling spree for a good three weeks of November, turning net sellers at one point of time. However, investors have continued to pour in money in equities as gross sales of these schemes were pretty strong at nearly Rs 11,000 crore. The fall in Indian mutual funds’ investment in stocks comes even as their foreign counterparts continue to remain aggressive buyers.
Niranjan Risbood, director (fund research) at Morningstar India, said: “Fund managers would be cautious at this stage as markets have run quite a lot over the past few months. They might have opted to remain on the sidelines for the time being as from a short-term perspective, there could be some corrections. But the long-term story remains intact.”
So far in the current financial year, mutual fund managers have net invested about Rs 25,000 crore - one of the highest in the sector's history.
