No rush for exit anytime soon, say brokers, fund managers

Investors have stopped looking for exit options as the equity market has witnessed strong support at every high point after the UPA
government got a stable mandate, brokers and fund managers told SundayET.

What has further acted in favour of a rising market is the investor's fear that they would miss the bus if they fail to enter the market now.

Executive director at Benchmark Asset Management Company Rajan Mehta confirmed the trend. "We were expecting some redemption pressure to come once the market inches upward but on the contrary we are getting decent inflows," he said.

The situation could also provide an outlet to mutual fund companies which have been sitting on high cash mainly to meet the anticipated redemption. Sanjay Sinha, CEO at DBS Cholamandalam Asset Management, says, "Generally speaking, most of the mutual fund companies are still sitting on high cash level partly on anticipation that investors who were sitting on losses, will probably exit once markets touches higher levels. The industry has not, however, seen any major redemption in the past couple of months."

There is a general tendency among the investor community that when market goes down people sell either to book profit or to minimise losses and whenever the markets take the reverse turn, investors begin to buy. "We are seeing a change in the general sentiment of investors and many of the expected sellers have become buyers," says Mr Sinha.

In fact, new fund offers (NFOs) in equity segment, which was completely dry for the last several months, have begun to see some action. Recently, ICICI Prudential Mutual Fund and IDFC MF garnered more than Rs 1,300 cr through two of their NFOs. Target Return Fund of ICICI Prudential MF received around Rs 800 cr, whereas, Hybrid Infrastructure Portfolio of IDFC MF has mobilised almost Rs 500 cr till date. In addition, there are a number of NFOs which are still open for the subscription. Also, BSE Sensex and Nifty, which have been heading towards north for sometime, have proved that the demand is now more than supply.

Also, the institutional investors have started putting money in the equity market. In the last three months, mutual fund community invested more than Rs 3,000 cr in the shares. In fact, in the last one month, foreign institutional investors (FIIs) invested about Rs 18,000 cr.

According to Prasanth Prabhakaran, Sr VP & all India head for broking at Kotak Securities, the rally of Sensex from 10,000 to the current level of over 14,000 was unexpected. Also, the outcome of the elections surprised many, and consequently on Monday, May 18, 2009, no major trade could take place as trading was halted after the indices touched upper circuit twice. "Now, since we have a stable government on the driver's seat, investors expect economic condition to improve gradually, and hence prefer to remain invested. Yet the Budget is the next big event coming up," he said.