The Hindu Business Line : MFs buying lifts benchmarks

Despite higher inflation numbers, benchmark indices shot up quite sharply on Friday. Market participants said that this was due to across-the-board buying by institutions, particularly domestic funds.

According to them, domestic mutual funds have, of late, been sitting on a large pile of cash. Since the financial year 2007-08 is nearing, fund managers have used this money to push up the stock prices in order to shore up the net asset values (NAV) of their schemes.

According to the dealers, the buying was quite aggressive in the mid- & small-cap space, which moved up in the popularity charts during the current financial year. Dealers said that the interest in this space was mainly due to the NAV-propping exercise by several mutual funds.

According to the provisional data, domestic funds have been net buyers to the tune of Rs 729.50 crore on Friday even as foreign institutional investors remained net sellers of Rs 401.95 crore.

Notwithstanding the recent upheaval, the BSE Sensex has returned 27.3 per cent in FY 07-08, while BSE Midcap and Smallcap indices produced a return of 23.15 per cent and 25.18 per cent respectively.

Short-covering by traders is cited as another reason for Friday’s rally.

K.S. Badri Narayanan

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