Equity MFs sell stocks even in rising markets

Even as foreign institutional investors (FIIs) net-invested nearly $2 billion, sending markets higher in January, equity mutual funds (MFs) remained largely on the sidelines, selling stocks to the tune of Rs 10,899 crore, or Rs 1,616.3 crore more than what they bought in the month (till January 27), according to data with market regulator Sebi.
“We don’t have much money to invest as our cash levels are not very high,” said Sankaran Naren, chief investment officer (CIO), equities, ICICI Prudential MF.Overall cash levels in equity MFs have remained at around 7% since June 2011, giving fund houses limited room to step up investments in a rising market.
Domestic institutional investors (DIIs) — that include MFs, insurance firms, banks and financial institutions — also remained heavy net sellers during the month. DIIs net-sold stocks worth Rs 5,960.3 crore as on January 27, according to BSE data. DIIs sold more stocks than what they bought for 13 consecutive trading sessions in the month.
“In some cases, (stock) prices moved up much faster not because of (any change in) fundamentals but due to massive short-covering,” said Sunil Singhania, head, equities, Reliance Capital Asset Management.
“When we bought (stock), valuations were quite compelling. So, there has been some partial profit-booking now,” says Gopal Agrawal, CIO, Mirae Asset Global Investments India. Equity mutual funds had net-bought stocks worth Rs 1,390 crore in November and December when the markets had nosedived.
However, industry officials insist that the sharp rebound has not resulted in huge redemptions in equity funds.