The party just doesn?t seem to get over. Foreign institutional investors (FIIs) on one hand have been pumping in money to pull the 30-share Sensex of the Bombay Stock Exchange (BSE) to scale 20K, and on the other hand domestic mutual fund (MF) managers have been taking refuge in debt market instruments.

Fund managers who have been dealing with redemptions in equity schemes have increased their exposure in debt market so much so that MFs debt exposure have increased by 180% since August this year.

Though, fund managers are not candid about the redemption pressures that they are facing, but data from the Securities and Exchange Board of India (Sebi) show that from net buyers to the tune of Rs 4,093.90 crore in August, MFs have turned net sellers to the tune of around Rs 2,433.60 crore in October.

In October to date, MFs have bought debt instruments to the tune of around Rs 12,232.80 crore.

This is an increase of around Rs 2,588.20 crore or a rise of around 27% from September when MF bought debt papers worth Rs 9,644.60 crore.

A fund manager who did not wish to be named said, ?The market is witnessing large inflows from long-only funds and that is why the market is having a free run. At a time when the equity market is getting so volatile, investors are sheltering themselves to protect their capital. There is a strong and systematic inflow in fixed maturity plans that were launched last month in

September.?

FIIs on the other hand have been quite flamboyant in pumping in money in the Indian equity market. During the Sensex journey from 19K to 20K, FIIs have pumped in Rs 1,530.10 crore or $ 379.30 million. This despite the fact that the market watchdog cracked the whip on Participatory notes (PNs).

After the announcement, FIIs started withdrawing hugely and in a matter of just four trading sessions, they pulled out Rs 6,459.20 crore.

The events in the next few days also seem to hold the key for new things to come, like the review of the credit policy by the Reserve Bank of India (RBI).

R Rajagopal, CIO, DBS Cholamandalam MF said, ?We believe the central bank would take a middle path and maintain a neutral view on the interest rate. Although, the excess liquidity in the banking system may necessitate RBI to take appropriate short-term measures, we believe this may not result in any further spiraling of interest rates in the economy.?