Date:23/05/2006 URL: http://www.thehindubusinessline.com/2006/05/23/stories/2006052303641200.htm

Back Mutual funds ignore equity for debt at peak levels

Rajesh Abraham

Mumbai , May 22

Guess where the mutual funds were parking the funds they mobilised in recent times through equity schemes?

While the mutual funds were buying into equity markets in a small way, the domestic fund houses have been major buyers of debt over the last two months. According to SEBI figures, the mutual funds were net buyers for Rs 10,063 crore in April and May. This is in comparison to the net purchase of Rs 7,551.20 crore in equity markets during the corresponding period.

"Small wonder, mutual funds were going slow on equity markets, even though it was estimated that they have mobilised over Rs 20,000 crore since January this year for equity market scheme," said an analyst with a local brokerage.

Similarly, during the last couple of weeks, mutual funds were increasing their exposure to the debt market on a consistent basis, even as they remained net sellers in equity market on several days this month.

According to SEBI figures, on the market peak day of May 11, mutual funds were net sellers in the stock markets for Rs 68 crore even as they were net buyers in the debt market for Rs 1228.54 crore. "This also shows that mutual funds have waited for the markets to correct for making major purchases," said the analyst.

Large exposure

On overall investments too, mutual funds have a larger exposure in debt markets compared to equity markets. For instance, during the last fiscal, mutual funds total exposure in debt market stood at Rs 36,618 crore compared to the equity market investments of Rs 14,305 crore.

Analysts said they expect the mutual funds to slowly enter the equity markets following the correction in Sensex of over 2,000 points from its peak level of May 11.