Domestic mutual funds increase stock purchases
Net mutual fund buying of local stocks totalled in August, outpacing inflows from FIIs for the first time this year
With equity markets scaling new highs, domestic investors are joining the party with gusto. Net mutual fund buying of local stocks totalled ₹ 6,957 crore in August, outpacing inflows from foreign institutional investors (FIIs) for the first time this year. Note that FII net inflows flagged in August, but the slack was taken up by domestic mutual fund purchases. The buying by mutual funds is being driven by fresh money from retail investors and launch of new fund offers because of a buoyant market sentiment, said market pundits.
Net inflows into equity (growth) mutual funds were ₹ 10,815 crore in July, the highest since January 2008 when they touched ₹ 12,000 crore, according to data from the Association of Mutual Funds of India (Amfi). It is reasonable to assume that much of the inflows into equity mutual funds come from retail investors.
Will the party continue? Fund managers seem to think so.
Around 25-27% of household savings were going into gold and real estate in the past few years because of high inflation. Now that gold and real estate prices have corrected and inflation has eased, retail investors are flocking to equities as there is optimism over economic growth, said Chandresh Nigam, managing director and chief executive officer of Axis Mutual Fund.
But FIIs hold the key to sentiment. If they start selling, that very well may lead to a correction in the markets and stanch these retail inflows, if not turn them into redemptions.
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