Indian Stock Market Blog

Mutual funds are not facing any redemptions even as the stock markets climb new highs daily. Domestic investors, generally known to book profits at higher levels, are not doing so. In May, when the markets tanked, investors had pulled out.

The industry asset base has increased every month with the rise in market levels. The mutual fund industry grew by Rs 32,037.4 crore between November and December when Sensex gained 734 points to reach 13,700 levels.

Opinions

“Redemptions are not happening as investors have entered the markets gradually at all levels. The maturity of the industry and investors is being seen at these market levels,” said Mr Ved Prakash Chaturvedi, Managing Director, Tata AMC.

“Redemptions will happen if there are changes in fundamentals of companies. However, our GDP growth in the first half of the year has been the highest since 1991 and markets should continue to perform well. All factors support the investors to stay invested,” said Mr K. Umesh Kamath, fund manager, Canbank Investment Management Services Ltd.

Long-term bet

Fund managers back the long-term growth story in Indian markets. They opine investors have turned mature leading to a growth in the asset base of the industry.

“Investors are now entering mutual funds through the systematic investment plan (SIP) route at all market levels. This has helped them to remain invested without taking too many exposures. Also, even if markets tank, it may not reflect the overall equity outlook. Thus, redemptions are not happening and the `long-term’ realisation has come about in investors,” said Mr A. Balasubramanian, Chief Investment Officer, Birla Sun Life AMC.

Most fund managers say equity markets, by their very nature, can expect corrections and investors are aware.

“Investors have to look at the asset class value. Redemptions should occur only if there is a total negative outlook on the particular asset class. Investors need to concentrate on their portfolios and the asset class values,” said Mr Anup Maheshwari, Head – Equities and Corporate Strategy, DSP Merrill Lynch Fund Managers.

Cautious

However, investors have certainly become cautious at the current levels, say fund managers. “Money is being increasingly poured in new fund offers rather than existing schemes with investors becoming cautious,” said Mr Mihir Vora, Head of fund management – equities, HSBC AMC. To avoid redemptions, mutual funds have been talking of a long-term lock-in in equities. The industry has recently seen the launch of a spate of closed-ended funds based on this strategy.

Some fund houses have, however, raised their exposures to large cap stocks as it offers liquidity to meet any future redemptions. They believe in preserving returns rather than distributing returns.