Morgan hints at big money flow

Says pension funds will invest more

With equity mutual funds schemes raking in a record inflows in August 2017 and other sources of institutional funds such as National Pension Scheme (NPS) and Employees Provident Fund Organisation (EPFO) stepping up their investment in equity markets, global financial service major Morgan Stanley said India is in the midst of a domestic liquidity super cycle.

According to the latest data released by Association of Mutual Funds in India (AMFI), the equity mutual fund schemes witnessed a record inflow of `19,515 crore in August taking the total assets under management (AuM) of the industry to `20.59 lakh crore.

“Pension assets under NPS stood at $30 billion at the end of July. We estimate their equity assets to be at $3.5 billion. Secondly, EPFO has raised its equity allocation to 15 per cent in FY2018 from 10 per cent in FY2017. As per our estimate EPFO could likely invest `25,000-`30,000 crore in equities in FY2018 of which `5,700 crore has been invested this year till date,” Morgan Stanley said.

A strong inflow of funds from domestic institutional investors has provided the muchneeded stability to the Indian equity market as it has managed to cushion the impact of sudden outflow of money from foreign portfolio investors (FPI).

The low volatility

As per our estimate EPFO could likely invest `25,000-`30,000 crore in equities in FY2018 of which `5,700 crore has been invested this year till date. — MORGAN STANLEY

according to market experts have led to increased confidence of small investors in the market.

Stating that the domestic flows have acted a counterbalance to volatile foreign flows through the year, Kaustubh Belapurkar, director, manager research, Morningstar Investment Advisors India said, “Retail investors are increasingly investing in mutual funds through Systematic Investment Plans (SIP), which helps them reduce market timing risk. Currently the industry receives close to `5,000 crore per month through SIPs, which is a very healthy number. Another heartening trend is that unlike earlier market corrections, in the market correction of November 2016, significant flows came into equity funds and continued to come in through the months after. This can be attributed to increasing awareness and maturity levels of investors”.

“Similarly, equity ETF assets rose to new highs of $8.4 billion. Year-todate, ETF inflows stood at $2.6 billion (Rs 169 billion),” the US-based leading global financial services firm said in its report.