MFs to invest Rs 8000 cr in markets

Stock markets may soon witness a huge capital inflow from the domestic mutual funds, who are waiting for the right investment opportunity with a cash pile of over Rs 8,000 crore (Rs 80 billion).

The BSE benchmark index Sensex, which has already breached the 13,400 mark, is moving towards its next milestone and fund houses are keeping a close eye on possible ways to cash on the positive upsurge in the markets.

The huge pile of cash that mutual funds behest with them would sooner or later land in the equity markets, leading brokerage firm Sharekhan said in a report.

Out of the total cash of Rs 8,155 crore (Rs 81.55 billion) held by domestic mutual funds in October, new fund offers alone have mobilised Rs 1,466 crore (Rs 14.66 billion), while the rest Rs 6,689 crore (Rs 66.89 billion) is from the existing schemes.

Cash-rich mutual funds have been in a strong investment mode over the recent past with the market sentiments improving and Sensex scaling new high almost every other day, market analysts said.

The report said, "Cash as a percentage of the total corpus (for all funds which are atleast 3 months old) declined from 7.8 per cent in September to 6 per cent in October."

As seen by previous trends, MFs had deployed their cash aggressively in equities to reap the rich harvest of the strong momentum in the market.

This led to cash levels for all equity funds going down to Rs 8,155 crore in October from Rs 8,249 crore (Rs 82.49 billion) in September.

Total assets under management for equity funds increased by 4.9 per cent to Rs 127,943 crore (Rs 1279.43 billion) in October, following strong fund flows arising out of new fund offering collection.

The almost doubling of the funds flows in October as compared to September is mainly attributed to the significantly higher amounts mobilised by NFOs, the report said.

The AUM of the equity diversifies funds surged by 3.3 per cent whereas that of tax planning and sector funds rose by 7.3 per cent and 4.3 per cent respectively in October, the report said.

Interestingly, the redemption volumes stood marginally higher at Rs 5,811 crore (Rs 58.11 billion) and the money flowing into existing schemes slightly declined to Rs 5,777 crore (Rs 57.77 billion) as against the previous month, it added.

However, MFs recorded a near five-fold jump in the NFO collections resulting in doubling of the net funds in the last month.