The Mutual Fund (MF) industry is getting mature in terms of its investment strategy in the equity market. After burning their fingers in May meltdown last year, the fund houses have learnt an art of entering at lower levels to book profit at higher levels in the market.
Domestic markets have been volatile since the beginning of the current calendar year. Global factors like subprime mortgage crisis and the domestic uncertainties have hit the equities market.
The Bombay Stock Exchange (BSE) Sensex has closed a record high at 20,582 points on January 11. However, both the global and domestic uncertainties have weakened the investors? sentiments. After peaking, the Sensex has dipped by 23% or has shed 4,822 points to close at 15,760 points on March 14 (Friday last) this year.
The fund houses continue to invest in the equities inspite of a volatile market. According to the figures released by Sebi, the MF industry has invested a net of Rs 4,547 crore since January 10, till date, the period during which markets have remained extremely volatile. The MFs have invested Rs 31,147 crore since 2005-06 to January 10, 2008. And, they added another Rs 4,547 crore between January 10 and March 14, taking their total investment to Rs 35,694 crore in equities since year 2005-06.
A senior fund manager from a domestic fund house said that it is true that the recent market downturn has hit the return of the majority of the equity schemes offered by the fund houses. But, the fund houses have decided to continue their investment in equities as the investors have expressed their faith in the MFs as an alternative investment vehicle in a volatile market. The fund houses continue to get good inflows in the existing schemes. Moreover, the New Fund Offerings (NFOs) too have helped the MF to maintain investment flow into the equities.
Interestingly, the foreign institutional investors (FIIs) were the net sellers at Rs 12,277 crore during the period under consideration.
Market observers said that the FIIs have reduced their stakes in the equities because of the sub-prime crisis. They have withdrawn funds to meet their requirements in the US and other developed markets.
