The market has travelled a good distance from the 12,612 Sensex level seen on May 10 to 9,822 , which it touched on Tuesday. In the course of that journey, there have been wild swings, 1,111-point crashes intra-day and 616 point surges. But amidst the drama, some interesting figures are emerging.

Consider the following FE Research Bureau data. Taking the movements of the Sensex of over 200 points either way from the beginning of this year, one comes across some interesting figures on FII movements and the benchmark index. On April 18, for instance, the Sensex rose 282 points. But that day, the FIIs pressed net sales of Rs 274 crore. Similarly, on May 17, when FIIs put through net sales to the tune of Rs 423 crore, the Sensex moved up 344 points.

And on May 23, when FIIs net-sold a hefty Rs 1,243 crore, the Sensex moved up 341 points! June again throws up some interesting figures. On June 5, FIIs net purchases were Rs 571 crore, but the Sensex fell 238 points. Similarly, on June 8, when they put through net buys of Rs 111 crore, the Sensex once again sunk 461 points.

What does all this mean? Perhaps, that we may be witnessing the first little signs that there are players other than FIIs who may be also beginning to play a role in the way the market moves. And chief among these ?other players? are the mutual funds (MFs).

Some may argue, for instance, that in May, FII net sales and the Sensex moved in tandem. But there is an important aspect here, too: on many of those days of mayhem, purchases by MFs have helped cushion much of the falls.

Take May 18, when the Sensex crashed 826 points. The FIIs net-sold Rs 810 crore even as the entire market panicked and sold, but the MFs put through net buys of Rs 763 crore. More intense were the net sales by FIIs?of a hefty Rs 1,935 crore?on May 24, but the Sensex fell 250 points as MFs bought a hefty Rs 1,162 crore. So, clearly, the MF purchases did act as a cushion.

Does that mean MFs are emerging as a counter-force to FIIs in the market? Perhaps not. In fact, it would even be wrong to assume they should play such a role. Simply because they will be answerable to their unit-holders and will be dictated by the way investors behave. If they anticipate redemptions, they will sell to either pre-empt or meet redemption pressures. But the increasing role of MFs in the market is a good sign.

• MFs have cushioned the fall in markets on many days of late
• To channelise savings to investments, they should go into more towns, cities
• Product innovation, customised plans based on segment needs, hold the key

It is well known that MFs can play an important role in channelising savings into investments and thereby bringing in more domestic funds into the markets. And that domestic funds are available has been evident from the hefty subscriptions some initial public offers (IPOs) from companies, as well as new fund offers (NFOs) from MFs, garnered only a few months before.

But for that, MFs will need to walk the talk?they will need to implement what several fund houses have been saying at discussion forums year after year. They will need to move away from the top 20 cities to the dust and grime of at least the top 200 towns to mobilise savings from there. If the banks have around 67,000 branches, MFs have a lot of catching up to do. And most potential investors are still risk-averse, preferring to put their monies either in physical assets or fixed return instruments.

But MF players agree that gradually, their efforts are nearing fruition, at least as far as the regulator is concerned.

The Securities and Exchange Board of India (Sebi) recently said it was planning to release norms for real estate funds shortly. Gold funds and capital protection plans are also on the anvil.

MFs will gradually begin to come up with new and innovative products to woo the investor. Going forward, they will need to do even more: come up with segmentation based on customer needs, and show greater creativity in products.

Alongside, fund managers will also have to hone their skills, as the futures and options (F&O) market becomes a major opportunity for arbitrage and hedging. Thus far, other than arbitrage funds, their operations in the F&O segment have been limited. With banks still unable to play a major role in the equity markets, the onus will be on MFs to provide the channel for savers to invest in equities.

Only a mix of best practices, innovation and expansion will ensure they play the role they are expected to.