TO BUY MU­TUAL FUNDS This Septem­ber

Lo­hit Bharambe and Yo­gesh Su­pekar track the trend in mu­tual fund in­vest­ing in In­dia and, in as­so­ci­a­tion with Neerja Agar­wal, bring to you 7 of the most promis­ing mu­tual funds to in­vest in, “THIS SEPTEM­BER”

Dalal Street Investment Journal - - CON­TENTS -

RIS­ING RE­TAIL IN­VESTORS IN IN­DIA

In­dian eq­uity mar­kets may have en­tered into a con­sol­i­da­tion phase cur­rently af­ter hit­ting record highs but the mar­kets for sure are wit­ness­ing good amount of in­ter­est from re­tail in­vestors in In­dia. In fact, the do­mes­tic in­vestors' par­tic­i­pa­tion has been the high­light of In­dian eq­uity mar­kets since last cou­ple of years.

It looks like eq­uity cul­ture in In­dia is fi­nally mak­ing in­roads. For this, lot of credit should go to the mu­tual fund in­dus­try for spread­ing aware­ness on the as­set class that has out­per­formed all the other as­set classes in the long run.

The irony of In­dian eq­uity bull run has been the lack of par­tic­i­pa­tion from In­dian re­tail in­vestors, so far. Re­tail in­vestor par­tic­i­pa­tion in In­dia has not been im­pres­sive even as for­eign in­vestors were seen lap­ping up In­dian eq­ui­ties since the dawn of lib­er­al­i­sa­tion and eco­nomic re­forms. Ev­ery na­tion has its own in­vest­ing cul­ture and it is a well­known fact that na­tions such as the Unites States and United King­dom lead when it comes to eq­uity in­vest­ing.

The World Bank gives im­por­tance to the ra­tio of stock mar­ket cap­i­tal­i­sa­tion to gross do­mes­tic prod­uct (GDP) and in­cludes it in one of the hun­dreds of pa­ram­e­ters in judg­ing the eco­nomic de­vel­op­ment of the na­tion. In­dia’s stock mar­ket cap­i­tal­i­sa­tion to GDP ra­tio was 12 per cent in 1990 and now it stands at around 96 per cent (as on Au­gust 2017). The In­dian stock mar­ket cap­i­tal­i­sa­tion rose from $13 bil­lion in 1990 to $2.36 tril­lion (Au­gust 24, 2017); that is ~181.5-fold in­crease.

What is in­ter­est­ing to note is that the rise in the val­u­a­tion of the In­dian stock mar­ket was hith­erto driven by for­eign in­vestors. For­eign in­vestors alone in­vested a net amount of $183 bil­lion in the stock mar­ket since April 2000 till De­cem­ber 2016. The re­tail in­vestors' par­tic­i­pa­tion has been pal­try in com­par­i­son.

The re­tail par­tic­i­pa­tion has not only im­proved in mu­tual funds but also in the life in­sur­ance seg­ment. Life in­sur­ance AUM has reached close to ₹30 lakh crore in FY2016-17, thus re­flect­ing a steady growth of 19 per cent for the pe­riod. This growth in life in­sur­ance in­dus­try was seen due to in­crease in new busi­ness pre­mium and in­creased per­sis­tency ra­tio. The growth in AUM could also be due to a healthy rally in eq­uity mar­kets. The in­vest­ments in ULIPS (Unit Linked In­sur­ance Plans) showed a steady growth of 27 per cent, reach­ing ₹7.50 lakh crore. This re­flects that the in­sur­ance in­dus­try is gain­ing mo­men­tum.

We can safely say that due to ex­tremely good per­for­mance of eq­uity mar­kets last fis­cal, the par­tic­i­pa­tion of re­tail in­vestors in­creased in both the mu­tual fund in­dus­try and the in­sur­ance in­dus­try.

IN­VESTORS PRE­FER SIP ROUTE

The SIP route of tak­ing ex­po­sure to eq­ui­ties in In­dia seems to be the flavour of the sea­son once again as more and more in­vestors log in to in­vest in their pre­ferred mu­tual fund scheme sys­tem­at­i­cally. Ac­cord­ing to CAMS data, there are al­most 30 lakh SIP ac­counts with ticket size rang­ing be­tween ₹1000 to ₹2499, out of which the B15 cities have al­most 27 lakh such ac­counts. While the same data source sug­gests there is some trac­tion seen in the SIP rang­ing be­tween ₹2500 and ₹4999, it clearly re­flects that ma­jor­ity of re­tail in­vestors are will­ing to test wa­ters with smaller ticket sizes in eq­uity mar­kets by tak­ing the SIP route for MF in­vest­ing.

AMFI data shows that the MF in­dus­try had added 8.23 lakh SIP ac­counts each month on an av­er­age dur­ing FY2017-18, with an av­er­age SIP size of about ₹3,250 per SIP ac­count.

Even to­day I see there is lack of aware­ness about mu­tual fund in­vest­ing in B15 cities. As a MF distrib­u­tor, I am con­duct­ing lot of MF aware­ness pro­grammes, but I do feel more needs to be done when it comes to cre­at­ing aware­ness. I see that the ticket size of SIP is be­tween ₹5,000 to ₹10,000 per month for my bas­ket of in­vestors. Most of the in­vestors come seek­ing for MFS in the mid and small-cap space. Sachin Rane, MF distrib­u­tor

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