MFs catching up with FIIs in equity spending - FE

... invested over $2 bn in FY07

The Indian mutual fund (MF) players are fast catching up with their international counterparts-- the foreign institutional investors (FIIs) -- in terms of net investments in the stock market. Indian MF players were net buyers to the tune of $2 billion (Rs 9,000 crore) while FIIs, on the other hand, as expected, were net buyers to the tune of over $5 billion during April ’06-March ’07 (FY07). An interesting trend was also witnessed during the volatile year: FIIs were net buyers in equities in those months when the MFs were net sellers and vice-versa.

The FIIs have purchased equities worth Rs 25,646 crore in FY07 and MFs were net buyers at Rs 9,030 crore during this period. The liquidity provided by both the sets of institutional players has played a crucial role in the market achieving new highs during the year. Bombay Stock Exchange (BSE)’s Sensex gained 16% to close the year at 13,072 points on Friday.

According to data released by Sebi, FIIs were net sellers at Rs 7,354 crore in the May meltdown, when the US Fed decided to hike interest rates by 25 basis points. The MFs, on the other hand, were net buyers at Rs 7,893 crore in May 06. Apart from May, FIIs were also net sellers in December '06 at Rs 3,667 crore, while MFs were net sellers at Rs 1,976 crore in June ’06, at Rs 160 crore in July ‘06 and at Rs 24 crore in November ‘06.

Commenting on this trend, Sailav Kaji, analyst, Pioneer Intermediaries, said, “The investment pattern of both MFs and FIIs indicates that MFs are gradually emerging as bigger players in the Indian stock market. That the FIIs’ net inflows will be more than any other set of investors is a foregone conclusion as they are really big in size and operate in various parts of the globe. FII investments are determined by global trends, while investments by MFs is mainly governed by the liquidity situation prevailing in the market at that point of time and the prevailing market level.”

Another interesting aspect of the MFs’ investment pattern is that they were net sellers in the first three months of calendar 2007.

They were net sellers at Rs 944 crore in January,and Rs 274 crore in February. However, both FIIs and MFs were net sellers in March. The FIIs have made net sales of Rs 722 crore and MFs were net sellers at Rs 1,741 crore in March when the market was volatile through the month.