Mutual funds pull ahead of FPIs in stock market investment
Domestic mutual funds pumped in over Rs 20,000 crore in the stock market during April-May to take advantage of the rally even as overseas investor exposure tailed off.
Going ahead, fund houses are upbeat over the industry's performance for the entire current fiscal while expecting investment from new investors to fuel growth of the sector.
Mutual fund managers invested a net sum of Rs 11,244 crore in stock markets in April and Rs 9,358 crore in May, taking the total to Rs 20,602 crore, as per data released by the Securities and Exchange Board of India (Sebi).
This comes on the top of over Rs 51,000 crore investment in stocks in 2016-17.
In comparison, foreign portfolio investors (FPIs) bought equities worth Rs 10,000 crore during the same period.
According to market experts, the mutual fund industry is at a take-off stage in terms of growth and Indian investors are warming up to investments in equity as an asset class.
"The net inflow in equities can be credited to maturity of retail investors who have come up on the 'learning curve'," says Anil Chopra, Group Director, Bajaj Capital.
Echoing the point, Vidya Bala, Head, Mutual Fund Research at FundsIndia.com, said: "Domestic inflows have been looking at the long-term story. Buoyed by continued strong inflows from retail investors and the part correction in some market cap segments such as mid-caps, mutual funds have found opportunities to deploy more in the equity market."
The mutual fund industry is managing an asset base of over Rs 19 lakh crore, which is likely to cross the Rs 20 lakh crore mark this fiscal.
Bala has attributed lower inflow by FPIs compared to investment made by mutual funds to the General Anti Avoidance Rules (GAAR).
"Net flows from FPIs in March were a massive Rs 30,900 crore, but it tapered off in April and May. This could be because of GAAR that kicked in from April 2017. FPI flows coming from tax havens such as Singapore or Mauritius will now be subject to short-term capital gains for holdings less than a year," she said.
"... while some chunk of FPIs come through P-notes, whether FPIs will be able to pass it to their P-Note clients would be an area of dilemma and this could have caused lower inflows from FPIs in April and May," she added.
She, however, feels that the clarity on GST and the low inflation environment conducive to growth will soon make it attractive for FPIs to participate in India despite tax implications.