How the Steadfast Middle Class is Now Changing the Game
the markets. One is investors’ own SIP investments, the second is the equity investments from the Employees Provident Fund Organisation (EPFO), and the third is the equity investments of the National Pension System (NPS).
SIP investments in equity and hybrid funds now total an inflow of about .₹ 2,000 crore a month. Unlike HNIs’ trading which rapidly ebb and flow with every hiccup if the market, SIPs keep flowing, regardless of the fact that equities have been broadly stagnant for long periods of time. SIP volumes have grown steadily, as everyone who invests through SIPs ends up having a good experience, unlike HNI punters. Let’s come to EPFO now. During 2016-17, EPFO has been investing in equities at a rate that will bring the financial year’s total to .₹ 13,000 crore. That’s 10% of its incremental investments, which is the current norm. Even if this stays at the same level, natural growth will likely see next year touch .₹ 16,000 crore. What is distinct about the EPFO investment is that it will keep flowing in at an increasing rate no matter what happens.
The nature of NPS flows is also somewhat similar. NPS may not have lived up fully to its potential yet but its accumulated corpus is .₹ 1.66 lakh crore. Around 15% of this is probably equity. Like EPFO, NPS inflows will only increase with time and will always keep flowing regardless of market conditions.
Moreover, the outflows will be modest, predictable and a tiny fraction of inflows. You see what I mean by steadfast middle class money? This steady pattern of drip-investment will produce far better returns than the skittish HNI ever manages to earn. It will produce a generation of investors who tasted success as equity investors.