MFs invest Rs 1,230 crore in equities during lockdown; keeping high liquidity for possible redemptions

MFs invested Rs 6,363 crore in stocks in the last week of March, while they pulled out Rs 7,965 crore in April. Reversing the selling trend in May, they put in Rs 2,832 crore, the data showed.

 

Mumbai:

Mutual funds have invested just Rs 1,230 crore in stock markets during the lockdown and industry experts believe they are still waiting for a good "entry point" and maintaining high liquidity for any possible redemptions by corporate houses.

 

Going ahead, the primary factor that will determine mutual fund (MF) investment into equity will be their own inflows from investors. This will be put to test as many retail investors are facing risk of pay cuts and job loss over the next quarter or so, said Vidya Bala, co-founder of Primeinvestor.in.

 

Overall, mutual funds have made a net investment of Rs 1,230 crore in stocks since the nationwide lockdown was announced on March 24 to tackle the coronavirus pandemic, latest data available with the Securities and Exchange Board of India (Sebi) showed.

 

MFs invested Rs 6,363 crore in stocks in the last week of March, while they pulled out Rs 7,965 crore in April. Reversing the selling trend in May, they put in Rs 2,832 crore, the data showed.

 

Amit Jain, co-founder and CEO at Ashika Wealth Advisors, said mutual funds are not investing big amounts in equities as they are waiting for a good entry point, which he believes will come within two months.

 

In addition, MFs are keeping high liquidity for any possible redemptions by corporate house as post lockdown, the 44-player industry will face a lot of redemption pressure as corporates will withdraw a lot of money, he added.

 

In the entire month of March, MFs made an investment of over Rs 30,000 crore on attractive valuations as many stocks hit their 52-weeks lows.

 

Notably, foreign investors pulled out a massive Rs 61,973 crore from equities in March and Rs 6,883 crore in April amid fears of a coronavirus-induced global recession. However, they turned net buyers in May and invested over Rs 14,500 crore.

 

"We have traditionally seen MFs buy when FPIs are exiting and that played out in March with MFs buying on attractive valuations as many stocks hit their 52-week low in March.

 

"Post that with inflows slowing from retail investors in April and also investors redeeming on an uptick post the March hit, the momentum could not be sustained. May again saw some inflows that helped MFs pump into the market," said Bala.

 

"We are likely to see a see-saw behaviour from MFs over the next several months," she added.


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