The Hindu Business Line : MFs with exposure to commodity stocks will be hit hardest

What MFs say
Immediate impact will be more on new funds rather than on redemption pressure.
Fundamentals of equity market's upswing have not changed.

Mumbai , May 18

In an equity market down by near 7 per cent most mutual funds would have taken a hard hit, but those with exposure to commodity stocks and blue chips would have been hit harder.

In Thursday's market, all indices on the BSE and NSE have plunged in excess of five per cent with BSE Metal falling by 11.37 per cent.

"All equity funds would have suffered an NAV erosion, especially those which have invested in commodity stocks," said Mr Dhirendra Kumar of Value Research India Pvt Ltd.

The immediate impact of such an overwhelming decline in stock prices would not be as in redemption pressure as much as new funds being able to generate funds.

Mutual funds cashing in on the boom in equity markets have been launching equity funds of varying kinds.

Equity-based schemes have been turning in high rate of returns.

Mutual funds have invested Rs 2,819.61 crore in equity markets in May (up to May 17). Since April 1, mutual funds have invested Rs 5,940.17 crore in equities.

The market's current volatility with sharp declines are no causes for worry at this juncture, said a fund manager at a mutual fund house.

Long-term players

"Investors of mutual funds are usually long-term players. And equity markets are known for their volatility," he said.

The fundamentals of the equity market's upward movement have not changed.

"The India story continues. The stock markets have been riding on a global liquidity rally," he said.

He believes that as Indian bourses integrate with the global economic developments, mutual funds would be prompted to go in for disciplined investing.

The latest surge in stock prices have been spurred by robust corporate earnings and other bullish fundamentals of the Indian economy.

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