Now lets look at their net investments so far. As per the data available from SEBI, following are the net investments for MFs during Jan-May 2006.
Feb: - 246
May: 2,626 (so far)
Cash lying with the MFs (net of investments): 35,206 - 8,812 = Rs.26,394 crore.
Thus, even after investing over Rs.8.8k crore in the last three months, domestic MFs seem to be still sitting on mountains of cash. What does this mean for our markets ?
I think MFs are actively buying shares and taking advantage (?) of the FII offloading. I think they will remain net buyers for another 2-3 months. FIIs have been the culprits in the declines recorded in the last few days. Will this continue for long ? I think NOT.
MFs will increase their support, and FIIs (some hedge funds, is the market grapevine) are likely to turn positive numbers, or so I believe.
Moral of the story: If you've been smart enough (or rather lucky) to convert some of your holdings into cash recently, then start nibbling. And, if you are fully invested, remain so. Do not let a 7-8 per cent crash go bonkers. Instead, stay calm and remain invested. Markets will soon stabilise.