How have fund flows shaped up this year?

The markets are continuing to trade weak and lacklustre. So, how are flows- local and global - looking like?

Foreign institutional investors have sold Rs 8,430 crore this month. The outflows amount to nearly 10% of total FII inflows to India till date.

Fund outflows, at  Rs 13,036, were the highest in January this year. This was followed by June at Rs 8,430, Rs 7,770 crore in August 2007, and Rs 7,354 crore in March 2006.

There were negative fund inflows this year in four out of the six months. Fund inflows in 2008 stood at negative  Rs 13,063 crore in January, Rs 1,733 crore in February, negative Rs 130 crore in March, Rs 1,075 in April, negative Rs 5,012 in May, and negative Rs 8,430 in June.

Year-to-date, FIIs have sold USD 6.2 billion in equities in the cash market. They were net purchasers to the tune of USD 10.4 billion in futures and options. In total, they net purchased USD 3.76 billion year-to-date. Of this, around USD 3.55 billion has been sold since May 20.

However, domestic institutional investors were net buyers to the tune of Rs 41,246 crore year-to-date. Mutual funds invested Rs 8,178 crore while banks, domestic financial institutions, and insurance companies invested Rs 33,068 crore.

According to Pooja Meswani of CNBC-TV18, Reliance Mutual Fund has about 16% market share and is sitting on USD 1.5 billion cash. On the other hand, there is extremely selective buying coming in from bigger fund houses like DSP Merrill Lynch, SBI and HDFC.

We are not really seeing a break in the 13-15% average cash level in the fund portfolios. But if we take a look at the numbers, there is selective buying coming from fund managers that has led to buying of about Rs 2,000 crore worth of shares in this month and Year-To-Date we have seen about Rs 8,000 crore worth of shares bought by fund managers.

So, it is clearly not the kind of cash one would expect from mutual funds that would add any support levels to the markets. But on the other hand, on the investors’ side, fund managers are not facing any redemption pressures.

But if this volatility continues to sustain for a longer period of time, there is a possibility that fund managers will have to face a lot of redemption. At this point, they aren’t even seeing any inflows coming in. So, on the investor side, there is panic but no redemption pressures as such.

By Varinder Bansal / Pooja Meswani, CNBC-TV18

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