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Business News/ Market / Stock-market-news/  Mutual funds invest a record Rs38,627 cr in equities in FY15
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Mutual funds invest a record Rs38,627 cr in equities in FY15

Fund managers expect retail investors to keep pouring in money into stock funds over the next few years

Photo: MintPremium
Photo: Mint

Mumbai: Mutual funds (MFs) invested a record 38,627 crore in Indian stocks in the year to 31 March—more than double the previous highest in the year ended March 2008—and fund managers expect retail investors to keep pouring in money into stock funds over the next few years, marking a strong rebound after small investors lost interest in equities after suffering heavy losses following the 2008 global financial crisis.

Investors were attracted by robust gains in 2014 following the victory of the Narendra Modi-led National Democratic Alliance in the general election held in May, improving macroeconomic conditions and a sharp drop in crude oil prices.

For a long period, from 2009 to 2013, there were hardly any inflows into equity schemes of MFs as investors preferred to invest in gold, real estate and fixed deposits, said S. Naren, chief investment officer at ICICI Prudential Asset Management Co. Ltd. That trend has reversed in the current fiscal year, he said.

BSE’s 30-share benchmark Sensex has gained 22.7% for the financial year to date and is set to post its biggest gain since the year ended March 2010.

MFs were net sellers of local stocks for five straight years following the year ended 31 March 2009, and were net buyers of the asset class for six consecutive years before that, from 2003-04 to 2008–09.

“I think these are all multi-year trends, and inflows into MF schemes, and consequently their investments in Indian equities, will continue at a good pace over the next financial year," said Naren. “Retail investors are still largely under-invested in equities. If market returns are muted from here for some time, it will actually lead to higher inflows into equity schemes as people can have an attractive entry point in that case."

The Indian MF industry’s assets under management rose 1.76%, or by 20,840 crore, to 12.02 trillion in February 2015, according to the data released by the Association of Mutual Funds in India.

In a 9 March note, Crisil Research said that this is the first time the industry’s assets crossed the 12 trillion mark and added that such gains were led by inflows into equity, balanced, gilt and liquid funds.

The positive sentiment for the underlying asset class helped equity funds attract net inflows to the tune of 5,840 crore for the 10th consecutive month in February and the category’s assets rose 1.41% to a record high of 3.46 trillion, Crisil Research added.

“I think there are three key trends playing up—a shift to financial assets from physical ones, word of mouth from successful retail investors in mutual funds, and some retail investors who saw big returns being delivered in the last one year and decided to invest," said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd.

Every trend gets accentuated in the market, and even when gold was giving negative returns, and real estate wasn’t as exciting, people still followed the past trends, and continued investing, added Shah, explaining that the strong performance of equities over the past year will draw investors to the asset class.

Shah said that the trend of strong inflows into equity schemes of MFs is all set to continue from here and added that financial savings were increasing and it was a minimum three-five year trend and even more if the market performs.

Ashwin Ramarathinam abd Ravindra Sonavane contributed to this story.

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Published: 30 Mar 2015, 12:20 AM IST
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