New Delhi: After pulling out capital from equities in April, mutual funds invested over Rs 2,400 crore in stocks last month, mainly on account of strong GDP growth, controlled inflation levels and balanced liquidity in the economy. Going forward, we expect strong inflows from the mutual fund space into equities on positive macro numbers and the current fair value of Nifty,” said Firoz Aziz, deputy CEO, Anand Rathi Wealth.
Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC said, “Stable GDP growth, low inflation, investor-friendly policies and global market sentiments towards emerging economies have played a key role in attracting investments from both mutual funds and foreign portfolio investors (FPIs) performs.” , Said.
Mutual funds infused a net Rs 2,446 crore in equities, while there were net withdrawals of Rs 4,533 crore in April, according to data available from the Securities and Exchange Board of India (Sebi).
However, there is a disparity in May investments between mutual funds and foreign portfolio investors (FPIs), with mutual funds showing lower investments than the Rs 43,838 crore invested by FPIs. In April also, foreign investors put in Rs 11,631 crore.
Market experts believe that this temporary change in investment pattern is a significant positive for the Indian market. “This trend reflects the interplay between FPI and domestic institutional investors (DII) flows, where the two investor categories act as a counterbalance to each other; during the period when FPIs sell their investments, DIIs, including mutual funds, move to buy securities, and vice versa,” Chaturvedi said.
Furthermore, this pattern provides liquidity to the market and enables strategic exits and profit-booking opportunities.
He added that despite fluctuating investments from FPIs and DIIs, the overall trend has been positive, with 11 consecutive months of net positive results for the market. Nitin Rao, head of product and proposition at Epsilon Money Mart, attributed the latest investments by mutual funds to improving global cues. In the longer term, India’s growth prospects remain high amid concerns of slower growth in major advanced economies.
The mutual fund industry has gained momentum due to factors like strong GDP growth, controlled inflation levels and balanced liquidity in the economy. Aziz of Anand Rathi Wealth said the fundamentals of the economy and corporates are strong.
Earnings growth is positive for most sectors except healthcare, metals and oil and gas. However, the top three sectors preferred by mutual funds are banking and financial, auto and capital goods. Overall, mutual funds invested over Rs 1.8 lakh crore in equities in FY 2022-23, mainly due to strong interest from retail investors and fair valuations due to market correction. Moreover, a similar amount was invested in FY22 as well. Earlier, he had withdrawn Rs 1.2 lakh crore from equities in 2020-21.