Mutual funds ride stock market boom, retail investors lead rally
MUMBAI: The recent rally in equity markets has brought cheer to the mutual fund (MF) industry, with retail investors making a rush for units, as hopes of economic revival and the government’s reform measures improve longterm prospects for Indian stocks.
High net-worth individuals (HNIs) and retail investors contributed to the rise in equity MF investments, while inflows into government securities-oriented funds and gold exchange-traded funds saw a sharp fall, according to latest data by the Association of Mutual Funds in India.
While the Sensex gained about 19% during the six months ended September, the Nifty rose 20%.
Equity investments in MFs, which have been on the decline till last year, saw an uptick in September, with funds adding a record 400,000 folios during the month, taking the total number of equity-oriented folios to 290 million.
“Retail investors have started increasing their allocation to equity funds due to poorer performance of other asset classes such as real estate and gold,” said Nimesh Shah, MD, ICICI Prudential AMC. “If you look at the Indian household’s balance sheet, there is still too much allocation to physical assets. As the performance of financial assets improve, more investments could move towards long-term debt and equity over the next three-five years.”
The HNI segment, which consists of individuals investing ` 5 lakh or more, posted a 15% rise in folios during April-September. Retail segment saw the third consecutive half-yearly rise, adding 19,179 folios during the period.
Equity funds have been a major contributor to mutual funds’ asset allocation, with a 46% rise in the number of folios during the period.
Retail folios in debt funds also maintained the uptrend, adding 25,000 units during April-September.
Analysts, however, cautioned investors not to jump the gun too soon. “This is a trend, which is typically seen in a rising market when retail investors who are reluctant to invest directly in the stock market, turn towards MFs,” said Vidya Bala, head of research at Fundsindia.com.