At $570m in investments, equity MFs continue to bet on markets

Coimbatore: The steep fall in markets after the union budget hasn’t deterred fund houses from investing. Equity mutual funds (MFs) continue to bet on the stock markets and have made net investments of around $570 million (Rs 3,643 crore) so far in February (till February 8), data with markets regulator SEBI showed.

In contrast, foreign institutional investors (FIIs) have net sold shares to the tune of about $820 million (Rs 5,231 crore) during the month, data with share depository NSDL showed. The FII sell-off comes after they invested $2.15 billion (Rs 13,781 crore) on a net basis in equities in January taking the stock markets to fresh life-time highs.

The benchmark Sensex and the broad-based Nifty have lost 4.9% and 4.6% respectively so far in February following the weakness in global equity markets amid concerns over the impact of the long-term capital gains (LTCG) tax on shares and equity MFs announced in the union budget.

Equity MFs emerged as the biggest investors in the stock markets in 2017. Fund houses invested 2.3 times more money than FIIs pumping a massive $19 billion (Rs 1,18,774 crore) during the year, the highest ever for a calendar year. MFs beat their much larger overseas peers for the second consecutive year during 2017.

“Inflows (into equity MFs) have been quite good. There are quite a few stocks that are available at reasonable valuations in the large-cap space now,” said Sankaran Naren, executive director, ICICI Prudential MF. “A lot of stocks are at reasonable valuations because of the correction. The earnings growth has also been better in Q3 (third quarter of 2017-18),” said Gopal Agrawal, chief investment officer, equities, Tata MF.

Though key indices have declined by 5%, many stocks, even the large-cap ones have fallen by 15%-20%, he said. “We found these stocks quite attractive,” Agrawal said. Systematic investment plans (SIPs) have continued and inflows have been higher as investors deployed funds in equity-linked savings schemes (ELSS or tax-saver funds) to reduce their tax liability, a top official with a leading fund house said.

The January-March quarter (Q4) traditionally sees higher inflows into ELSS, which has emerged as an attractive tax-saving-cum-investment option among investors. “People who missed the bus (the surge in stock markets) are also pumping money. Fund managers, who had accumulated cash after the markets ran up sharply, have started deploying money,” the official said.