The Hindu Business Line : MFs, FIIs to wait and watch

FUND managers are happy to be fence sitters till there is some clarity about the new government's economic policies. "Mutual funds are being cautious investors now. We feel that it is wiser to wait for a couple of days and observe the market," said Mr Krishnamurthy Vijayan, Chief Executive Officer, JM Mutual Fund.

The intra-minute volatility today left a lot of fund managers confused and unable to transact. "You have to be careful when the market is zooming up and down. What you see on the screen is sometimes not the actual price as the prices move quite sharply. Executing the trade has to be cautiously done, its not an easy market to even buy," said Mr Ashim Syal, Chief Invesmtne Officer, ING Vysya Mutual Fund.

Fund managers, across the board, also felt that today's fall is a knee-jerk reaction to the lack of political clarity. "We believe that today's correction is unwarranted and is a knee jerk reaction, especially in light of the strong fundamentals on both the economic and earnings front. We believe that the broad direction of the reform process will continue as all parties realise the importance of reforms in furthering the economic expansion in India," said Mr Sivasubramanian K.N., Senior Vice-President & Portfolio Manager - Equity, Franklin Templeton.

Foreign institutional investors are careful to point that their buy or sell decisions are based on the conditions in other markets as well. "World markets are not doing well. We have been net buyers today, value picking on sectors where we see robustness. It is quite likely that hedge funds are forced to sell either on redemptions or as an interim measure to park their funds elsewhere until there is some clarity on the reforms process," said Mr Andrew Holland, Executive Vice-President - Research, DSP Merrill Lynch Ltd.

"I do not think that anything positive can be expected until the Common Minimum Programme is announced. That would at least give an indication of what the economic policies are likely to be. Mutual fund investors are likely to repose confidence until the budget is announced," said a fund manager with a large asset management company.

The dichotomy of the current situation, according to fund managers, is that the P/E ratios of a lot of blue chip scrips have come down to the 3-5 ranges. While this seems really attractive to be bought, some of these have to be passed up as the political uncertainty and lack of inkling on the reforms process makes sectoral decisions hard to make.

Most mutual funds are expected to have ended Monday's trading as net buyers, even if by a small margin. "We'll see how the markets go tomorrow, but I am in a buying mood," sums up Mr Syal, a thought that is partially echoed across the industry.