Foreign portfolio investors (FPIs) and domestic mutual funds’ investments in the equity market at Rs 97,705 crore has surged nearly three-fold during the first half (January –June) of current calendar year 2017 (CY17).
While the FPIs have invested Rs 55,908 crore during this period, mutual funds have invested Rs 41,797 crore in equities in a first half of CY17. Their collective investment is 3.4 times higher as compared to the same period last year when they pumped in a net Rs 28,811 crore, National Securities Depository Limited (NSDL) data show.
The abundant liquidity has taken the benchmark indices – the S&P BSE Sensex and the Nifty50 –nearly 18 per cent higher to become the best performing market globally on year-to-date (YTD) basis. The rally in mid-and small-caps has been sharper, with S&P BSE Mid-cap and S&P BSE Small-cap indices surging over 30 per cent during this period.
Of the Rs 41,797 crore invested by mutual funds thus far in CY17, bulk of their investment – Rs 30,328 crore, or 73 per cent, has been in the April – June 2017 (Q1FY18) period. They have been net buyers in the equity segment for the 11th straight month, starting August 2016.
“Investors have matured over time and realised that professionally managed and well-regulated mutual funds are a safe investment avenue. That apart, the other forms of investment – real estate, gold etc – have lost charm. As a result, investors turned towards mutual funds, who then invested this corpus in equity markets,” explains Nilesh Shah, managing director, Kotak Mahindra Asset Management.
On the other hand, of the total amount that FPIs have invested in first half of CY17, almost one-third or Rs 16,097 crore, has been through subscriptions to initial public offers (IPOs) and secondary offerings. Even then, their half-yearly investment thus far in CY17 is the highest since the quarter ended June 2014 when they had invested Rs 59,521 crore in the equity segment following the victory of Narenrda Modi – led National
Democratic Alliance (NDA) in the general elections.
Going ahead, experts feel that India will continue to attract flows from domestic and foreign investors given its macros. Though in the near-term there could be aberrations / withdrawals, such rotations are a normal part of the tactical shifts in allocation that all funds make periodically, they say.
“India has been, and continues to be, one of the biggest overweight for global investors, who feel that the country offers a great long-term story.
The most encouraging feature is the surge in inflows we have seen from domestic investors. This is again going to be very healthy for the markets since it will reduce volatility caused by global factors,” says Jyotivardhan Jaipuria, founder and managing director, Veda Investment Managers.
In January 2016, FPIs withdrew Rs 11,471 crore from the Indian markets, which was the worst in the past eight years for the first month of a calendar year, following a fall in crude oil prices, mixed corporate earnings of India Inc and rising concerns over China slowdown.
“Things are looking up for the Indian economy. Inflation is under control and the exports are slowly picking up pace. Goods and services tax (GST) bill implementation was a big concern, but it is not likely to be as big a disruptor as was thought earlier. Except the fact that the valuations are a bit stretched, India continues to be an attractive destination for foreign investors,” adds U R Bhat, managing director, Dalton Capital Advisors.
Shah of Kotak says that unless there is a catastrophic event that shakes investors’ confidence in growth and equity markets, the flows will continue. “Most people have realised that investing in equity market now is a long-term game, and one needs to stay put to reap healthy return despite any short-term pain,” he says.
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