The Covid-19 pandemic crisis has been the prime reason for stark correction in the benchmark equity indices. While January saw the S&P BSE Sensex and NSE Nifty 50 touch their life-time highs, the same indices witnessed nearly 40% correction in the third week of March.
And the net investment data of mutual funds (MFs), collated by market regulator Securities and Exchange Board of India (SEBI) shows that MF managers played it smart. While the benchmark indices were on fire in January, MF’s net investments in equities stood at ₹1,384.38 crore.
On the other hand, foreign portfolio investors (FPIs) had invested a net of ₹12,122.58 crore in January. In absolute terms, FPIs invested over 8.75 times more than MFs in the month when the benchmark indices were in their most bullish phase.
And, when the indices corrected sharply in March, MFs have likely made the best of the fall. Because, while FPIs sold equities worth ₹61,972.75 crore, MFs were buyers to the tune of ₹30,130.74 crore. Interestingly, the net investments of MFs in March alone accounted for 32.87% of their total of net equity investments for FY20.
And, in comparison to FPIs, who were net equity buyers worth ₹6,152.26 crore across FY20, MFs bought 14.9 times more at ₹91,677.53 crore. Also, during FY20, there were just two months when MFs registered net outflow from equity; April 2019 (-₹4,599.66 crore), and November 2019 (-₹5,097.44 crore).
In comparison, FPIs registered net outflow from equity in three months: July 2019 (-₹12,418.73 crore), August 2019 (-₹17,592.28 crore), and March 2020 (-₹61,972.75 crore). While FPI’s net outflow in FY20 totaled at -₹91,983.76 crore, that of MFs added up to a little over a tenth at -₹9,697.1 crore.
Overall, MFs were net investors to the tune of ₹5,11,991.43 crore, as their investments in debt instruments stood at ₹4,20,313.9 crore – 82.09% of the total – while net equity investments accounted for the remaining 17.91%.
Compared to FY19, when MFs’ net equity investments were ₹88,147.54 crore, the latest fiscal’s net buying worth ₹91,677.53 crore is a growth of ₹3,529.99 crore, or 4%. However, MFs’ debt investments grew by ₹33,981.31 crore, or 8.8%, in FY20 compared to previous fiscal’s ₹3,86,332.59 crore.
It is noteworthy that while MFs have recorded marginal growth in equity investments in FY20 compared to the previous fiscal, the numbers are much lower compared to FY18’s net equity investments of ₹1,41,834.96 crore. Compared to FY18, the shortfall in net equity investments in FY20 works out to ₹50,157.43 crore, or 35.36%.