The Hindu Business Line : Mutual funds on a stock selling spree

THE gross sales of equities by the mutual funds have outstripped gross purchases in five of the last eight months from April till November, according to the data available with the Securities and Exchange Board of India.

On the contrary, investment in the debt market by the mutual funds has exceeded sales during the same period.

That the market has been continually on the ascendancy despite the mutual funds' selling could be due to various factors including substantial purchases by the FIIs and increased retail participation in the market during this period.

It is also reflective of the depth in the stock market with investors of all hues concentrating not only on the Sensex stocks or stocks in the specified group but also on the mid-cap counters.

Even during the current month, in the sixteen trading days from November 1 to 20, on nine days, the net sales by the funds was higher than the net purchases in the equity market. But in the debt market, this occurred only on three days during the same period when selling was more than the purchase.

According to the SEBI data, during the financial years 2000-01, 01-02 and 02-03, the gross sales in the equity market by the mutual funds was more than gross purchases. If the gross purchase in 2000-01 was Rs 17,375.78 crore, the gross sales was Rs 20,142.76 crore, resulting in a net deficit of Rs 2,766.98 crore.

In the next year, while the gross purchase of equities was worth Rs 12,098.11 crore, the sales were worth Rs 15,893.99 crore leading to a deficit of Rs 3,795.88 crore. In 2002-03, the purchase was worth Rs 14,520.89 crore while the sales amounted to Rs 16,587.59 crore, a deficit of Rs 2,066.70 crore.

In the current year from April till November 20, the sales have outstripped purchases in five of the last eight months.

The gross purchase and sales figures with the deficit figures are shown in the accompanying table.

Will the selling spree by the mutual funds during the current year exceed the performance during last year?

It is difficult to guess right now because much of the deficit had occurred in the past three months (including November).

Since the total deficit so far this year is relatively low compared to the full year's figure for the previous three years, it reasonable to hope that the gross sales this year would not be as high as in the previous three years, unless of course the market trend changes in the remaining months of the current fiscal.

It is also pertinent to note that the gross equity purchase made by the funds so far in the current year (April to November 20) at Rs 19,380.72 crore is higher than the full year's figure in the past three years.

The selling is also higher than the figures for 2001-02 and 02-03 and only marginally less than that for 2000-01, which indicated that the funds are churning portfolios and booking profits much more swiftly this year.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Mutual funds on a stock selling spree