Retail Investors Go In For Equity MFs, Stay Off Capital Market

Mumbai, September 29: | Updated: Sep 30 2003, 05:30am hrs
Even as the stock markets are poised to look upbeat with most stocks posting substantial gains on the bourses, retail investors have preferred to stay away from the capital markets, by investing indirectly through equity schemes. Redemption pressures have compelled mutual funds (MFs) to stay on cash as most investors have booked profits last month and are building hopes for a correction to re-enter equity funds.

Fund houses have witnessed a significant slowdown in inflows in the month of September as compared with the last three months and have consequently turned net sellers on the bourses.

While FIIs have continously been pumping in money who were net buyers to the tune of Rs 639.30 crore for the week-ended September 27, 2003. Local fund managers have been booking profits and the domestic MFs were net sellers to the tune of Rs 432.24 crore on the bourses in the month of September. In August MFs however, were net buyers aggregating to Rs 403.38 crore while in July they were buyers to the tune of Rs 71.06 crore.

Said a chief investment officer (CIO) of a leading public sector mutual fund, September is a weak month as far as investments in debt funds are concerned. However even in the case of equity schemes there have been no inflows but only an appreciation of existing investments. Retail investors are still hesitant to invest as they enter when the market is at its peak and then burn their fingers when the market falls.

PVK Mohan, fund manager, Dynamic Equity Fund, IL&FS Mutual Fund said, The markets have gone up by 1,400 points from the bottom of 3,000 points around six months back. Investors are adopting a cautious attitude and are waiting for a correction which has not come. Some of them have booked profits last month, which is the reason for domestic funds having turned net sellers. The inflows have also slowed down and some funds have seen an outflow.

Fund managers concur that the pace of net inflows in the month of September have slowed down considerably since the past three months. Said a fund manager of a leading private sector mutual fund, As is the case with the rest of the mutual fund industry, we have also seen the inflows slowing down off late. Perhaps the investors have booked profits at higher levels when the senex touched 4,470 levels, so mutual funds have faced redemption pressures. Moreover the inflows have not been like last month.

Said Vivek Mahajan, assistant vice president, retail, IL&FS Investsmart, When the markets started moving up, investors waited for a correction to take place which was not setting in. They entered the market and went in for leveraged buying; so they have got stuck in the current correction. However, as far as investing in equity mutual funds is concerned, redemption has taken place by investors who had entered earlier. So although there is a net inflow the figure may not be very big.

Reliance Mutual Fund manager R Sheshagiri said, We are sitting on 10-11 per cent cash at the moment and are being very stock specific in our approach. The 2Q results are likely to be good which may reverse the trend and the players may restart buying stocks.