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Mutual fund managers have invested a little over Rs 8,000 crore in stocks so far this month, amid weakness in the stock market.
The Indian markets are down nearly seven per cent in the past fortnight, due to uncertainty on how demonetisation will impact economic growth. Domestic MFs, with equity assets under management worth Rs 5 lakh crore, were seen buying frontline stocks such as Tata Motors, Infosys, Tata Consultancy Services, Maruti Suzuki, ACC, Ambuja Cements, ICICI Bank, Kotak Mahindra Bank, Asian Paints and State Bank of India. Most of these stocks have seen a sharp fall.
The aggressive buying is consistent with the ‘buy on dips’ strategy of fund managers. With the view that the markets are on a structural uptrend, they step up their buying whenever equities undergo a sharp correction.
This buying also provides a counterbalance to the selling by foreign investors. In recent trading sessions, MFs have invested as much as Rs 1,700 crore in a single day.
S Naren, chief investment officer (CIO) of ICICI Prudential MF, says: “The global markets are unsettled on account of the ambiguity surrounding the new economic policies by the winning US presidential candidate. Hence, we believe Indian equity markets could remain volatile in the next few weeks, providing several buying opportunities.”
Adding: “Owing to demonetisation steps, the beneficial effect of lower interest rates and lower cost of capital will show up in construction and infrastructure projects, probably leading to a big capex cycle and economic boom, over the next three years. We are now more positive on our equity outlook for the next two-three years and recommend investors to consider spreading their lumpsum investments over the next few weeks, across large-cap, multi-cap and infrastructure funds.”
Fund managers expect the market volatility to continue and to buy at lower prices. They advise investors to do likewise or buy more units of MFs.
Sunil Singhania, CIO-equities at Reliance Nippon MF, says: “In the near term, there will be volatility in the markets. Investors should stay invested and use the corrections as opportunities to purchase additional units.”
Concurs Navneet Munot, CIO of SBI MF: “The markets are worried that the massive crackdown on the black economy, along with GST (goods and services tax) implementation could create huge pains in the near term. Discretionary spending and sectors thriving on demand from cash in the parallel economy will bear the brunt from these disruptions. However, we believe that corrections due to these concerns offer an opportunity to investors, as the developments are extremely positive from a structural long-term perspective.”
Sector executives say investors are pouring additional sums into equity and debt. There is no redemption pressure despite the weakness in the market, they add.
With four more trading sessions in November, it is expected that net investment will decisively cross the Rs 10,000-crore mark for the first time since August 2015.
