Teji Mandi Explains: Mutual funds step up bets in equities

Teji MandiUpdated: Friday, April 08, 2022, 04:19 PM IST
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Local mutual funds (MFs) are optimistic about the Indian stock market despite all the volatility. In March, the gross purchase by MFs was Rs 1.3 lakh crore, the highest ever in a single month.

What’s Happening?

As we always say, invest in strong companies when the market goes down. That’s what fund managers are doing right now. Local MFs took benefit from the selling of foreign funds. Domestic investors also took advantage of the market correction. In February, net inflows in equity MFs went up about 35% compared to the previous month. This shows that seasoned investors and MFs were busy stocking up their portfolios while the market panicked.

According to media reports, Indian equities outperformed global equities and emerging markets on a year-to-date basis. As per the data by the Securities and Exchange Board of India (SEBI), domestic fund managers have invested Rs 3.8 lakh crore in the past five fiscal years, nearly double the investment of foreign funds. This indicates that local fund managers believe in the growth story of India.

Should You Be Concerned?

The market has heavily corrected in the last few months, which is a positive sign. Many expensive (high price-to-earnings ratio) stocks have become/will be affordable for investors. This points to the opportunity of buying fundamentally strong companies to reap benefits in the long run.

What Lies Ahead?

The market seems to remain volatile in the near future as the Ukraine-Russia war continues. Inflation and rise in commodity prices will be another hindrance that will keep the market unpredictable. While this remains, investors can use this situation to elevate the profit in their portfolios.

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