Equity mutual funds (MFs) pruned their holdings from the secondary markets to create dry powder for investing in maiden share sales, reported Business Standard.
According to the data provided by Nuvama Wealth Management, MFs pumped in a cumulative ₹3,300 crore into eight initial public offerings (IPOs) that hit the market in November. Their overall equity investments last month stood at ₹1,700 crore (without IPOs, equity MFs would have been net-sellers of ₹1,600 crore).
“MFs preferred deployment in IPOs over the secondary markets,” observes Abhilash Pagaria, head-alternative and quantitative research, Nuvama Wealth Management.
According to his analysis, MFs invested over ₹900 crore each in Global Health (Medanta) and Archean Chemical Industries (Archean Chemicals).
The investment in IPOs comes amid record deals. November was the best month for IPOs in terms of deal volumes since December 2021, according to PRIME Database.
About 10 IPOs have mobilised a collective ₹10,566 crore.
Notwithstanding MFs’ pivot towards the primary market, the secondary markets managed to do well, thanks to robust flows from foreign portfolio investors (FPIs).
In November, net inflows into active equity MF schemes had plunged to a 21-month low of ₹2,260 crore.
Domestic fund managers tend to be leaden-footed on investment during bouts of strong FPI flows (as witnessed in November).
Also, the IPO bets in November seem to have played out well. Of the eight companies that MFs invested in, only two are currently below their issue price, while shares of top bets, such as Medanta, Archean Chemicals, and Bikaji Foods International, are currently up more than 25 per cent of their IPO price.