Mutual lifelines

Mutual lifelines
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First Published: Wed, Oct 15 2008. 12 29 AM IST
Updated: Wed, Oct 15 2008. 12 29 AM IST
Indian mutual funds (MFs) and insurance companies have often been the sole big buyers in the stock market this year, even as foreign portfolio investors rushed for the exits. They could keep buying because they did not face redemption pressure.
But it now seems that the investors who have parked their money in equity and money market MFs—especially the latter—are pulling out some of that money. Mint reported in its Tuesday edition that banks and companies have taken out around Rs30,000 crore from money market MFs to generate liquidity for themselves.
The Reserve Bank of India has now eased the rules for bank lending to MFs. The central bank’s formal statement on these moves says: “Such finance, if extended to equity-oriented mutual funds, will form part of banks’ capital market exposure.” That suggests that equity funds, too, are facing redemption pressures. Has domestic confidence finally caved in?
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First Published: Wed, Oct 15 2008. 12 29 AM IST
More Topics: RBI | Mutual Funds | Lending | Stock market | Views |