Equity purchases by mutual funds reach record Rs 45,120 crore in March – Top Stories

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Illustration: Ajay Mohanty

Domestic mutual funds (MFs) invested a record Rs 45,120 crore in domestic stocks in March, their highest ever buying in a month. This surge in domestic fund inflows came amid selling in smallcap and midcap stocks and execution of large block trades in blue-chip companies.

March deployments were three times the purchases seen in the previous month.

The previous record of monthly inflows from domestic MFs was set in March 2020 during the unprecedented Covid-19 selloff, when they brought in a net investment of about Rs 30,300 crore.

The sharp increase in MF buying also pushed total inflows by domestic institutional investors (DIIs), which include insurance companies and pension funds apart from MFs, to a new high of Rs 56,300 crore. The previous high was in March 2020 when they collectively deployed Rs 55,600 crore.

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MFs have made net equity purchases of Rs 82,500 crore so far this calendar year (CY24), almost half of the total deployment of Rs 1.7 trillion through 2023.

According to MF officials, inflows increased during the latter half of March as investors sought to buy dips. “There was some pick up in equity fund inflows in the second half of the month, leading to higher deployment in equities,” said DP Singh, deputy MD and joint CEO, SBI Mutual Fund.

Foreign portfolio investors (FPIs) were also net buyers in March, buying equities worth Rs 30,900 crore. Strong inflows from both MFs and FPIs during the same month are unusual.

However, March saw hectic share sale activity in major companies like ITC, TCS and InterGlobe Aviation.

Market players suggested that buying large amounts of stock in these companies from the secondary market distorted prices, giving institutional investors an opportunity to acquire some of these stocks.

MFs invest around Rs 10,000 crore through block deals, with ICICI Prudential MF alone buying ITC shares worth around Rs 5,000 crore through block deals in early March. The fund house has also invested over Rs 1,000 crore in Aster DM Healthcare along with SBI MF and Nippon India MF. Big deals also included SBI MF’s investment of Rs 860 crore in Aavas Financiers.

Equity purchases of MFs are mainly influenced by three factors: flows from investors, changes in cash holdings, and changes in hybrid fund portfolios between asset classes. According to a report by Motilal Oswal, equity schemes of the top 20 fund houses held 5.2 per cent cash at the end of February 2024. Keeping 5 per cent of cash in equity MF schemes translates to total cash held by equity fund managers. More than Rs 1 trillion.

The equity market witnessed a sharp decline in some sessions of March, especially in midcap and smallcap stocks. The Nifty Smallcap 100 fell more than 1 per cent during six sessions. The index fell more than 5 percent on March 13. After falling more than 12 per cent in March, the index ended the month down 4.4 per cent, while the Nifty Midcap 100 closed 0.5 per cent lower. Last month Nifty50 rose by 1.6 percent.

first published: 02 April 2024 | 7:06 pm Is

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