Investors eye mutual funds to cash in on downslide

With the markets on a steady downslide, investors in equity mutual funds (MFs) are now warming up to the idea of making an entry at lower levels.

Net inflows (difference between purchases and sales made by investors) in equity funds stood at Rs 1,546 crore for May, the strongest showing in three months. Equity MFs had recorded net outflows to the tune of Rs 1,076 crore in April.

Investors used the 18,000 level (of sensex) to make an entry, industry officials said. Investments under systematic investment plans (SIPs) have also started gaining ground. "SIPs have picked up in the last month," said Raghav Iyengar, executive vice president, ICICI Prudential MF.

Jaideep Bhattacharya, chief marketing officer, UTI MF, said, "Most investors coming now have taken a long-term view on markets. They think it is a good time to make an entry as valuations are attractive. They understand that investments made at these levels would fetch decent returns in 2-3 years."

With fixed income investments generating more than 9% returns and markets likely to remain rangebound in the near term, investors have realised that equities would not be able to score over other categories in the next few months.

Redemptions or exits made by investors in equity funds also remain low boosting inflows, industry officials said. A portion of funds being used for trading stocks is also being diverted to equity MFs due to the increase in market volatility, industry sources said.

But with markets yet to recover from the decline, fund houses remain cautious. MF investment in equity markets was a mere Rs 434.7 crore in May, data with the Securities and Exchange Board of India shows. Equity MFs became cautious as domestic and global markets remained patchy following a slew of discouraging economic signs.

"Both global and domestic economic factors resulted in a cautious approach," analysts said. After a lacklustre show in April, equity markets extended their downslide in May with the sensex and Nifty declining more than 3% in the month.

Sentiments dampened in May due to global factors including the rising credit risk perception about some European nations, high employment in the United States, and the fall in economic growth in the first quarter of FY12 in the country, market observers said.


Souce: Economic Times

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