Market poised for RECORD INFLOWS
The Indian stock market could see record inflows from domestic and foreign institutional players this year.
Experts say both FPI and domestic mutual funds are flushed with funds. Domestic asset management companies (AMCs) have seen an inflow of over Rs 28,000 crore into their equity funds in April-June 2017, a surge of nearly three times the flow of the year-ago period, underscoring the growing investor confidence in the market.
The unprecedented inflow has swelled the assets under management (AUM) of equity MFs to a record high of Rs 5.91 lakh crore at the end of June 2017 from Rs 4.28 lakh crore at June-end 2016.
Domestic funds are also raising money through new fund offers (NFOs) focused on equity schemes. In April-June 2017, MFs raised relatively huge Rs 4,908 crore through NFOs against a mere Rs 173 crore garnered in the same period last year. “Inflows into equity mutual fund schemes have been robust of late as investors are chasing higher returns in the wake of lower yields from fixed income instruments and poor performance by realty and gold,” said Vijay Singhania, founder, Trade Smart Online.
The Indian market has been among the best performers globally in 2017 on the back of strong liquidity from both local and global investors. Foreign inflows in the past six months continued to be strong as almost one-fourth of the emerging market (EM) inflows in 2017 has come into India. And the trend is showing no signs of a reversal, say experts.
FPIs have been aggressively buying into India from January this year and have seen inflows of $7.3 billion in a 24-week period.
MF inflows have continued to remain very strong. Equity MFs' average inflows have been Rs 17,000 crore per month, which is more than double of the previous two years' average inflows of Rs 8,000 crore per month.
Equity AUM accounts for 4.1 per cent of India’s market capitalisation and has a long way to go when compared to global averages, which portends well for the Indian equity markets over the long term, experts said.
Anita Gandhi, whole-time director, Arihant Capital Markets, said, “Inflow of money isn't stopping anytime soon. Low interest rates and lack of options in other asset classes have seen money coming into the equity market. The flow of money through systematic investment plan (SIP) has been the big positive and a game-cha nger in the Indian equity market.”
So far during the year, Nifty and Sensex have gained 23 per cent and 21.5 per cent, respectively. Also, a part of the money that were traditionally going to assets like real estate and gold are now coming to the equity market. “We are seeing domestic money move away from physical assets like real estate and gold into financial assets, a positive sign,” says Nirmal Jain, chairman, IIFL.
According to experts, the rally will be driven by two main factors– the domestic flows into Indian equity market and low deposit rates.
But the strong liquidity remains the main driving force of the current rally. Even foreign inflows into Indian equity could be robust. Some foreign brokerage houses say global equity flows into emerging markets is at a pretty early stage and they expect inflows of $30 billion year-to-date to continue to grow and India is likely to get a fair share of that.
Foreign investors and domestic mutual fund together have invested Rs 97,705 crore during the first half (January-June) of the current calendar year. While FPIs pumped in Rs 55,908 crore, MFs invested Rs 41,797 crore in Indian equities.
Singhania of Trade Smart Online, said, “this week's rise in market is purely on account of covering happening in the market following market regulator's recent move to ban holders of participatory notes (p-notes). This means P-note holders won’t be able to take naked exposure to the derivatives market anymore. Thus, all their existing positions will have to be squared off by the end of 2020 or by the date of maturity of the instrument, whichever is earlier.”
Ashwin J Punnen