Mutual funds significantly increased equity purchases in May, deploying fresh inflows and capitalising on market weakness after adopting a relatively cautious stance in April. According to reports from Business Standard, MFs bought equities worth nearly ₹63,000 crore in May, representing a 2.5 times increase from the amount invested in April. This substantial increase demonstrates the industry's strategic response to market conditions and investor sentiment shifts.
Benchmark indices ended May on a negative note, with the Nifty 50 declining 1.9 per cent and the Sensex falling 2.8 per cent during the month. As reported by Business Standard, this weakness followed a strong rebound in April when both indices had surged more than 6 per cent. The contrasting performance between the two months highlights the market's volatile nature and MFs' ability to navigate different conditions effectively.
Equity mutual fund schemes continued to attract robust investor interest, recording inflows of nearly ₹40,000 crore each in April and May. According to Business Standard, the value of equities purchased by MFs in a month serves as a key indicator for the industry's net inflows. The consistent high inflows across both months demonstrate sustained investor confidence in equity markets despite the mixed performance.
Current market sentiment indicators suggest a shift in investor confidence, with the CNN Fear and Greed Index ticking down to 57 this week from 61 last week. Additionally, the NAAIM Index rose to 98.39% equity exposure this week from last week's 82.02%, indicating increased institutional confidence in equity markets. These sentiment indicators provide additional context for MFs' strategic deployment decisions during May.
