Online trading in mutual funds hits a peak as volatility draws investors

Online trading in mutual funds touched a new high in August as investors used the volatility to play the market. The Bombay Stock Exchange's (BSE) Star MF platform, which has been seeing a steady rise in volumes over the last eight months, clocked an average daily turnover of `4.20 crore in August, the highest since inception in December last. Similarly, the National Stock Exchange's MFSS platform also witnessed an average daily turnover of `2.97 crore, more than twice daily volumes clocked in the previous months. Experts believe that attractive valuations on back of sharp correction in stock markets would have led to savvy investors buying in equity mutual funds. Those who chose to invest through the exchange mechanism are more attuned to market levels than the average investor, feels Rajan Krishnan, CEO at Baroda Pioneer Asset Management Company. "It could be that those who invest in mutual funds through the stock exchanges are more sensitive to the market. So significant buying comes in if the markets are falling," he said. The number of transactions have also jump up. The average daily orders on the Star MF platform stood at 521 in August, with close to 85% of them being buy orders. The increased activity could be a reflection of the increased equity inflows in the recent past, according to A Balasubramanian, CEO of Birla Sun Life Asset Management Company. "Retail flows towards equity funds have been positive over the last two months. The rising volumes on the platform give some comfort," he said. Latest figures from the Association of Mutual Funds of India show that the equity funds witnessed net inflows of `1,942 crores in August, the second highest in the last 3 years. Experts said gold exchange-traded funds and liquid funds have seen increased trading among high networth and institutional investors in recent times. This would have pushed up the volumes in August, they said. "With markets turning volatile, the number of liquid fund transactions has increased as yield on daily basis over last few weeks have really been good tempting people to park their excess money for short duration into these funds," said Rajesh Krishnamoorthy, managing director of Ifast Financial. Liquid funds, which basically invest in money market instruments such as certificate of deposits (CD) and commercial paper (CP) and treasury bills for short duration, have given monthly returns of 7.9% on ab annualised basis. That's quite attractive considering one can redeem them at a day's notice. "The high volatility in gold prices lately would have also resulted in increasing number of transactions on gold ETFs online," said Krishnamoorthy.