Equity markets are in the middle of strong capital inflows and the "dream run" may just be starting as India
makes the most of "domestic liquidity super cycle", says a Morgan Stanley
According to the global financial services major, August recorded 17th straight month of positive flows.
Domestic equity mutual funds
received inflows of $3.9 billion, the highest ever for any month, and if ETFs are included, the figure stood at $4.1 billion.
Year-to-date, domestic mutual funds
have received equity inflows of $18.6 billion while ETF infusion so far this year read $ 2.6 billion, it said.
"By the end of the month (August), equity mutual fund AUM stood at $111 billion, and as a percentage of market cap rose to 5.3 per cent, its highest level since July 2000. Similarly, equity ETF assets rose to new highs of $8.4 billion," the report added.
Moreover, fixed income
funds remained positive with inflows of Rs 356 billion. On a year-to-date basis, fixed income
infusion, at $ 19 billion, is close to equity flows.
At August-end, fixed income
AUM rose to $211 billion, from $202 billion in the previous month. The total AUM for the MF industry stood at $ 322 billion -- a record -- it added.
"We remain of the view that India
is in the midst of domestic liquidity supercycle," Morgan Stanley India
strategists Ridham Desai and Sheela Rathi said in a research note.
The report further noted that NPS' equity assets are expected to be at $3.5 billion while EPFO has raised its equity allocation to 15 per cent in 2017-18, from 10 per cent in 2016-17.
"NPS' pension assets stood at $30 billion at the end of July. We estimate their equity assets to be at $3.5 billion," Morgan Stanley
said, adding that "as per our estimate, EPFO could likely invest Rs 250-300 billion in equities in fiscal 2018, of which Rs 57 billion have been invested this year thus far".