With investors seeking global cues amid a volatile stock market, domestic mutual funds have put up a decent performance in February, stepping up their investments in the debt market, while remaining net sellers in equity.
With the overall assets under management of mutual funds swelling to Rs3,53,309.04 crore at the end of February, the month which triggered the bearish mood in the markets witnessed MFs remaining net sellers with Rs274 crore.
Debt markets surprisingly seemed to attract fund managers more than the equity markets, as MFs bought securities to the tune of Rs10,352 crore and sold only Rs7,683 crore.
This pegs their investment for the month at Rs2,669 crore—around Rs200 crore more than their investment at the end of January 2007, prolonging the 11-month trend from April 2006.
In equity, sectors like construction, realty, pharma, textiles, infrastructure and telecom were the favourite picks for the fund houses in February, while stocks were realigned in the FMCG and metal pack—resulting in a net investment of Rs12,697.09 crore during the 28 days.
The love affair with hot sectors such as cement, construction, manufacturing, auto, chemical and oil and gas stocks continued unabated as they figured heavily on investors buying list. In the last lap of the month, which culminated in the Union Budget 2007 being tabled by the finance minister, the BSE benchmark index Sensex which started off at 14,124.36 shed 1,186 points to end at 12,938.09 points on 28 February. Experts feel mutual funds might have missed a trick or two as the more than 1,000-point slide failed to spur them to step up buying as they sold shares worth about Rs12,971.14 crore during the volatile period. MFs may have pulled back a little by joining the IPO party in a big way with Power Finance Corporation and Firstsource Solutions being the hot favourites. Equity funds purchased shares worth Rs232.40 crore of PFC and another Rs56 crore shares of Firstsource.
Among other stocks that debuted, Indian Bank drew Rs65.55 crore worth funds, while IndusFila (Rs21.53 crore), Redington India (Rs16.17 crore) and SMS Pharmaceuticals accounted for Rs10 crore funds MFs, data compiled by brokerage firm Sharekhan shows.
In terms of value, TCS, ICICI Bank and Power Finance Corporation were the top purchases in existing holdings by MFs pooling in Rs1,168.85 crore for the big-ticket scrips.