Mutual funds on stock selling spree since Aug

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Mutual funds sold stocks worth Rs 11,349.60 crore in the past six months amid continued redemption pr­essure, but poured Rs 2,96,225.80 crore into debt since August.

Domestic fund houses have been net sellers in the equity market all through since September. Last these funds bought stocks was in August, when they ended the month as net buyers of stocks worth Rs 1,607 crore, Sebi data showed.

Since September, the funds have withdrawn Rs 11,349.60 crore from stocks. They have remained net sellers this month too, offloading stocks worth Rs 1,122.50 crore so far. There has not been a single month since September when there was net inflow of MF money into equities.

The biggest outflow from equities in the last six months was in October, when fund houses pulled out Rs 4,017.80 crore.

But they have invested Rs 34,352.60 crore in debt funds during the same period. The biggest inflow to debt was in January when Rs 45,415 crore investor money flowed into the bond funds.

Sameer Hassija, senior investment analyst at MorningStar India, said volatile markets, uncertain interest rate scenario and the rupee depreciation were the key triggers determining investment flow through 2013.

“Though mutual funds have witnessed a surge in inflows, only debt funds have managed to gain, while equity funds have continued to see outflows. Equity fund investors have been redeeming at higher levels of the market, thereby signaling their lack of confidence on the market’s ability to sustain at these levels,” he said

The number of retail folios in equity-oriented schemes has also gone down, indicating a decline in interest among investors in these funds, Hassija pointed out.

Ritesh Jain, chief investment officer of Tata Asset Management, said: “Overall the mutual fund industry saw a drop in equity folios as volatility increased in stocks and investors saw opportunities in debt to earn higher returns and shifted there.”

On the MF investors’ affinity towards debt, Jain said with yields rising to peak levels across terms, investors were keen to seek income opportunities on the debt side. “Increased volatility in the equity market also triggered the tilt in asset allocation towards debt, leading to more inflows to debt funds,” he said.

Different varieties of debt funds have been witnessing continuous inflow for some time now, said Hassija. “Within these categories, the lower-duration funds have been seeing more traction, thanks to lesser interest rate volatility. Although medium- to longer-duration funds have managed to hold investor’s fancy, a volatile interest rate scenario may keep investors at bay,” he said.

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