Mutual Funds Invest Rs 55,413 Crore in Financial Stocks Amid March Market Correction

Mutual Funds Boost Financial Stocks Amid Market Correction

Indian markets witnessed a sharp correction in March, with the benchmark BSE Sensex and Nifty 50 each falling 11.5 percent, due to rising tensions in the US-Iran-Israel conflict. However, mutual funds remained active buyers, purchasing stocks worth nearly Rs 1.13 lakh crore in the secondary market during the month.

The strong buying in financial stocks was notable, with mutual funds investing nearly Rs 55,413 crore in March, accounting for 49 percent of their total secondary market inflows during the month. This came despite a sharp selloff in banking shares, with the Nifty Bank falling 17 percent and the Nifty Financial Services declining 15.6 percent. Both indices recorded their sharpest monthly fall since March 2020.

The buying in financial stocks was driven by concerns that rising sovereign bond yields could result in mark-to-market losses on banks' government securities portfolios. India's 10-year bond yield rose more than 37 basis points in March to cross 7 percent, touching a one-year high. This rise in yields was driven by escalating geopolitical tensions, the ongoing US-Iran-Israel conflict, and higher crude oil prices, which reignited inflation concerns.

| Sector | Mutual Fund Inflows (Rs crore) | | --- | --- | | Financial Stocks | 54,413 | | Consumer Discretionary | 16,366 | | Telecom | 14,656 | | IT | 5,717 | | Commodities | 4,883 | | Healthcare | 4,178 | | Industrials | 4,139 | | FMCG | 3,795 | | Services | 3,548 |

Apart from financials, mutual funds were also strong buyers in consumer discretionary stocks, where they invested shares worth Rs 16,366 crore. Telecom stocks saw inflows of Rs 14,656 crore, while IT stocks attracted Rs 5,717 crore.

In contrast, foreign institutional investors (FIIs) were heavy sellers, offloading nearly Rs 1.26 lakh crore worth of equities in the secondary market during March. Of this, nearly Rs 60,000 crore was sold from financial stocks, followed by Rs 12,500 crore worth of auto shares.

| Sector | FII Outflows (Rs crore) | | --- | --- | | Financial Stocks | 60,000 | | Auto | 12,500 | | Construction | 9,154 | | Metal | 3,165 | | FMCG | 5,419 | | Consumer Services | 2,141 | | Realty | 4,693 | | Healthcare | 4,638 | | Telecom (Construction Materials) | 5,603 | | Services | 2,575 | | Oil and Gas | 4,129 | | Consumer Durables | 2,900 |

Overall, FIIs' ownership in Indian equities fell to 15.14 percent in March from 15.5 percent in February, while total assets under custody declined to Rs 62.46 lakh crore from Rs 71.78 lakh crore.