The dangers of high mutual fund inflows
Live MintMumbai: Nothing sedates rationality like large doses of effortless money,” Warren Buffett wrote in his letter to Berkshire Hathaway shareholders in 2000. In September and October, for instance, when foreign institutional investors sold equities worth ₹37,250 crore, mutual funds provided the backstop with net purchases worth Rs35,700 crore. So we end up with a situation where mutual funds are forced to buy stocks that they already own.” He and his students found that more than two-thirds of new money for top equity funds of two large fund houses went into their existing stocks. Panchapagesan is on the same page as Bakshi when he says, “It is a vicious cycle of flows driving prices, which, in turn, brings in more flows.” Are mutual fund SIPs the new dumb money? And our fund house has been advocating investors to opt for debt funds, balanced advantage/dynamic asset allocation schemes, in addition to equity schemes,” says Naren.