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Indian money managers are selling stocks to meet the longest stretch of withdrawals from equity funds in at least two years even as the domestic market was Asia’s biggest destination for overseas money.
The CHART OF THE DAY shows that Indian mutual funds have been net sellers of stocks for five straight months even as foreign funds have been net buyers for six consecutive months, according to data compiled by Bloomberg. The lower panel shows that redemptions by mutual fund investors since June have led to sales by domestic funds, with foreign investors being ready buyers. That’s helped boost the BSE India Sensitive Index 25 percent this year. The vast majority of the gain has come since June. The Sensex in 2011 tumbled 25 percent.
The steady increase in the past six months “is giving mutual-fund investors a chance to exit,” Dhirendra Kumar, chief executive officer at Value Research India Pvt., which has been tracking funds for more than two decades, said in a phone interview last week from New Delhi. “Indian funds are a slave of investor action, and the redemption pressure is showing.”
The Sensex has rallied the most among the so-called BRIC nations this year as government policies to open the economy to foreigners accelerated inflows. Overseas funds have plowed $23 billion into local equities this year, the highest among 10 Asian markets tracked by Bloomberg.
Prime Minister Manmohan Singh’s administration, striving to avert a credit-rating downgrade and revive economic growth, ended two years of policy paralysis in September by opening the retail industry to overseas companies such as Wal-Mart Stores Inc. and cutting fuel subsidies. A panel was also established recently to hasten infrastructure projects, which then approved changes to a century-old land law to help curb protests that often sparked delays.
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