MFs sell Rs 2,400 cr worth of shares in Jan-Feb

With the year-end approaching, mutual funds are becoming cautious. Fund houses have sold almost Rs 2,400 crore worth of shares in the first two months of calender year. During the same period last year, they bought shares worth Rs 5,625 crore.
Experts say that with March 31 approaching, a lot of fund houses are withdrawing from markets to maintain liquidity for meeting redemption pressures. Corporates withdraw from their mutual fund investments during this period for the payment of advance taxes and improving balance sheet numbers.
Mutual funds have been keeping abnormally high cash levels during these times. " Average liquidity in equity funds is in excess of 15-18 per cent and in some cases even higher", said a fund manager. With markets tanking 60 per cent from their peak levels, equity as an asset class has lost favour among all classes of investors.
Equity funds have become particularly cash strapped as fresh inflows into equity schemes have virtually dried up. In an industry with equity assets worth Rs 89,874 crore, mutual funds received only Rs 1,565 crore as inflows in February. The net inflows (after redemptions), however, stood at a meagre Rs 143 crore. Total redemptions in equity funds stood at Rs 1422 crore.
Even SIPs (Systematic Investment Plans), which had been a steady source of inflows for mutual funds every month, are getting withdrawn by jittery investors. "Investors are trying to cancel long term SIPs and in cases where the amount is large, they are trying to reduce it", said Vinay Shukla, Senior Vice President at India Infoline.
ELSS (Equity linked savings scheme) too have not seen significant inflows this year. January- March is the time of year when ELSS schemes receive huge inflows owing to the tax planning season.
Says Saurabh Nanavati, CEO, Religare mutual fund, " Incremental allocation to ELSS schemes hs definitely reduced this year compared to last few years because of the poor market conditions. People have started to move to traditional products such as PPFs and NSC. ELSS funds received only Rs 308 crore in February.
A Balasubramaniam, Chief Investment Officer, Birla Sunlife mutual fund said, " Fund houses are selling to be in cash. With a probability of market going down further, fund managers are waiting to look at selective opportunities."
Market experts say that distributors too are not focussed on selling equity schemes. Falling interest rates had made debt funds attractive and in the last few months distributors were pushing for those schemes. Many investors transferred their investments from equity to debt for better returns after their portfolio got battered due to markets.
Source: BS