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Title:Equity MF investors beat FIIs in '15

News Paper

MUMBAI: For years, equity mutual funds (MFs) were the poor cousins of the stock markets as foreign institutional investors (FIIs) always poured more money into direct equities. But for the first time ever, equity MF investors are overshadowing their overseas peers, having pumped nearly three times more funds into equity schemes in the current year than FIIs.

Equity MFs (including equity-linked savings schemes, or ELSS) have seen net inflows of Rs 80,580 crore, or about $12.5 billion, so far in 2015 (till October) - the highest on record. In contrast, FIIs have made net investments of Rs 27,699 crore, or around $4.25 billion, during the period.

In fact, net investments made by MF investors have already surpassed the highs hit in 2014. The surge in inflows into equity schemes has prompted fund houses to deploy money in shares in a big way. Equity MFs have deployed about $950 million per month on an average in 2015. Fund deployments peaked to an all-time monthly high in August after the stock markets plunged in the wake of the global turmoil in equity markets amid a sharp selloff in China.

"Investors are gradually realizing that equities are the best option on a tax-adjusted basis over the long term. So they are putting a bigger portion of their savings in equities," says Sunil Singhania, head (equities), Reliance Capital Asset Management.

Gopal Agrawal, CIO, Mirae Asset Global Investments India, says, "Interest (in equities) has been quite consistent among investors. Other asset classes such as gold and real estate have not done well and this has also helped. There is a clear shift in investment patterns. Investors have become a lot more mature. The attractiveness of other asset classes has diminished to a large extent. But the long-term outlook is quite positive for equities."

Barring odd instances such as the market meltdown in 2008 when the rout that followed the global financial crisis triggered a massive pullout by FIIs, overseas investors have stood head and shoulders above their domestic peers in investments into Indian stocks.

Incidentally, FIIs were the biggest buyers in the post-election market rally, pumping about $16 billion (Rs 97,000 crore) in 2014, nearly double the money invested by equity MF investors. FIIs also continue to remain the big daddy of Indian stock markets. They own an average 25.1% in BSE200 companies and 28.6% in Nifty50 firms. The value of their holdings in the BSE200 firms is pegged at around $335 billion. MFs own an average 3.6% in BSE200 companies, the value of which is estimated at about $50 billion, data shows.

Notwithstanding their lacklustre showing this year, FIIs have invested as much as $153 billion (around Rs 7.56 lakh crore) on a net basis in Indian stocks since 2002, data with share depository NSDL shows. MF investors have, however, net bought equities to the tune of only $48.6 billion (about Rs 2.4 lakh crore) during the period, data with the Association of Mutual Funds in India (AMFI) shows.

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