After nine months of sustained selling, domestic fund houses turned net buyers of equities in August as they took to bottom-fishing large caps, amid a fall in markets triggered by the rupee?s fall and the possibility of the US Fed tapering its bond purchase programme.
Mutual funds bought shares worth R1,600 crore in August after being net sellers of R19,771 crore since November 2012. Altogether, domestic institutional investors (DIIs) pumped in R6,284 crore in August. In contrast, foreign institutional investors (FIIs), the main drivers of Indian equities, pulled out $790 million (R5,298 crore) from the stock market during the month.
According to market experts, the battered-down prices of some of the large-cap stocks make them an attractive buy. ?It appears that MFs have partly used the cash in their portfolio to buy into large-caps as valuations have been attractive. Funds may be bottom-fishing in large caps, but with an eye on some quick trading gains over the short term,? said Shankar Raman, head, investment products and advisory services, Centrum Wealth Management.
Share prices of Nifty heavyweights such as BHEL (-24.8%), Asian Paints (-17.4%), L&T (-14.5%), Bharti Airtel (-13.2%), ONGC (-14.3%), ITC (-9.7%) and Sun Pharma (-7.8%) have taken a beating in August.
In August, Nifty lost nearly 4.7%. CNX 100, which tracks performance of the top 100 companies listed on the NSE, plunged 4.9% in August. In year-to-date, the broader index is down 8.8%. The average category returns of large-cap funds for the last one month stood at -5.04%, according to Value Research.
According to fund managers, the market looks attractive at current valuations. ?Markets have come down to 5,300-levels, which gives MFs a good opportunity to pick certain good-quality stocks,? said Kaushik Dani, head (equity), Peerless AMC.
Meanwhile, equity-oriented schemes continue to see net outflows. Equity funds have seen net outflows of R2,500 crore in the current calendar year till July, latest data available with Association of Mutual Funds India (Amfi) show.
Market experts feel that fund houses would be able to sustain their buying if inflows see a significant improvement. ?While the SIP inflows remain intact, funds are not seeing any significant fresh investments in the equity schemes,? said Deepak Chatterjee, managing director and EO, SBI AMC.