The Hindu Business Line : MFs sell Rs 5,194 cr worth shares in Oct

Mumbai, Nov. 20 Mutual fund houses were net sellers to the tune of Rs 5,194.3 crore during October. While their net purchases stood at Rs 16,252 crore, they offloaded Rs 21,446.4 crore, according to a SEBI data.

When markets run up the way they have in the past couple of weeks, there is a correction round the corner, said Mr Seturam Iyer, CIO of Shinsei Mutual Fund.

Typically mutual funds sit on cash when markets have run up and wait to deploy funds at lower levels, he added.

This waiting for better opportunities is a tactical call which the fund managers are taking, said Mr J Venkatesan, fund manager, Sundaram BNP Paribas Mutual Fund.

The cash levels for equity oriented funds that are more than three months old increased to 8.8 per cent of their AUM as on October 31, 2009, from 6.9 per cent as on September 30, 2009, said the Sharekhan report.

According to the report, some of the cash-rich equity diversified funds were Reliance Infrastructure Fund, ICICI Prudential Blended Plan, ICICI Prudential Equity and Derivatives Fund, Benchmark Derivative Fund, Canara Robeco FORCE Fund, Birla Sun Life Commodity Equities Fund and Reliance Tax Saver Fund.

The market is rising on liquidity and there is huge amount of foreign inflows that is boosting it, said Mr Venkatesan. Fund managers are playing cautious as the market has gone up steeply in a very short duration and the valuation comfort in equities is receding at these levels, he said.

The other reasons for sitting on cash is that the funds might be doing sector-rotation; this means they have just sold off their stocks before month end and will start deploying the cash in a different stocks or sectors from the beginning of the next month, said a fund manager.

Funds may also be holding higher cash to fulfil redemption requests if they might arise, said another fund manager.