Portfolio mgrs kitty shrinks 25% as stocks wilt

Key indices have dipped 13% in last 2 months.

Portfolio managers, who officially manage funds above Rs 15,000 crore, are having a tough time after key share indices dipped more than 13 per cent in the last couple of months. The equity value of their investments is estimated to have dipped nearly 25 per cent in the last two months.

Portfolio management service (PMS) providers are busy in devising strategies to combat the ongoing weakness in the market and to stop the erosion in their portfolio value.

The two-month long weakness in the market has taken a toll, with most existing portfolios in the red and the reluctance of new entrants in the PMS business to deploy cash in a hurry as the market is still in an uncertain territory, according to industry officials.

The strategy being adopted by PMS providers is to increase their cash and debt exposure to minimise the losses as "flight to safety" money is parked in liquid funds and short-term fixed maturity plans (FMPs).

"We have raised the cash levels in our existing portfolios to 20 per cent, while some of our recent portfolios are sitting over 100 per cent cash. We are waiting for some direction from the market in the next 15 days. Till then, we are not investing in equities," Phani Sekhar, fund manager with Angel Broking said.

Sekhar, however, said that there was no pressure from investors to deploy the funds, as most of them understand market conditions well and have a long-term goals.

Since January-end, the markets have been witnessing volatility in line with global trends and domestic issues such as inflation. Industry estimates indicate that around December-end, when the markets were at their peak, some PMS operators had taken huge exposure to bluechip stocks. However, following the weakness in the markets, they have faced losses and pressure from investors.

Kamlesh Kotak, head (equity research), Asian Markets Securities, said the brokerage house has been advising their HNI investors to remain in cash and wait for the market to stabilise.

The PMS market in country has grown manifold in the last few years. As per industry estimates, the Securities and Exchange Board of India-registered PMS providers have a market of around Rs 10,000-15,000 crore, while the share of unregistered PMS operators could be at least five times more than that of the official players. Some small-sized brokerages and investment advisors are, in fact, offering PMS at a lower price of around Rs 25,000.

"There is virtually no buying. Investors are not willing to invest in equities at these levels. The reason could be that the existing market sentiment suggests that levels could drop further. Investors, who invest through non-discretionary PMS, have been preferring to delay investments," said a fund manager associated with a top brokerage house.