There seems to be a sharp contrast between the strategies adopted by the two different set of institutional investors in the booming domestic equity market. Foreign institutional investors (FIIs) are deploying a huge amount of money in the Indian markets while domestic mutual funds (MFs) have decided to stay on the sidelines and sit on the cash at the current level when the 30-share Sensex is swiftly on the move to cross 1,000 points in the shortest possible time. FIIs are not only buying heavily but also are selling in huge quantities. MFs have turned net sellers for the second consecutive month in a row.
After being net sellers in equities in September to the tune of Rs 763.70 crore, the selling spree of MFs continued in October as well. In October, in just five days MFs have sold to the tune of Rs 762.40 crore worth of equities.
Though FIIs have been showing a high level of aggressiveness in the Indian markets post US Fed rate cut, being net buyers of equity worth Rs 24,156 crore (over $6 billion), some of the FIIs with short-term view has been aggressively selling during the same time.
MFs, on the other hand, are sitting on cash. In September, MF were holding cash the tune of Rs 11,044.62 crore. Even the money garnered by the three equity NFOs in September is waiting to be deployed in the market. Narayan Ramachandran, CEO, Morgan Stanley MF, said, ?Fund houses who are either sitting on cash or are selling heavily are worried about the fact that the market is over-valued. As a result of this, they are selling.?
Even the amount of cash the fund houses are sitting on is shocking. In September, Reliance MF is holding around Rs 3,740.37 crore of cash, UTI MF Rs 1,561.61 crore and ICICI Prudential Rs 683.78 crore.
A fund manager who did not wish to be named said, ?It is worrying times for us in the market. The market is moving too far too fast. Most of this is the participatory notes money that is coming in. I wish that the regulator and the government take a look at this as this steep rise is not sustainable.?
