Mutual Funds pump record money in stocks in FY15

Fund managers net bought shares worth Rs 40,000 crore

The year 2014-15 has seen highest-ever mutual fund (MF) inflows into the stock market. Fund managers net-bought shares worth over Rs 40,000 crore between April 2014 and March 2015. The robust buying was led by strong investor flows into equity schemes offered by fund houses. Investors flocked to MFs due to a positive outlook for the equity market triggered by change in the government at the Centre and expected turnaround in the economy.

The investment was not only highest in a financial year but  almost equivalent to the cumulative buying by MF managers between FY04 and FY08. Interestingly, it was the first time in the last six financial years the MFs were net buyers in the equity cash segment.

Between FY10 and FY14, fund managers had pulled out around Rs 75,000 crore from the equity market due to redemption pressure from investors.

“The worst on the economic front in India is clearly behind us. The GDP (gross domestic product) growth is improving, the current account deficit has narrowed sharply, the fiscal deficit is slowly but surely moderating, inflation is steadily coming down, with visible moderation in the key constituents of food and fuel,” said Prashant Jain, chief investment officer (CIO), HDFC MF.

“Given the likely recovery in the capital expenditure cycle over the next few years, India should emerge as the fastest growing economy,” he said. The country’s benchmark indices rallied around 25 per cent in FY15, while several equity schemes offered by fund houses managed to outperform.

S Naren, CIO of ICICI Prudential Mutual Fund, said India is the best investment destination from a three years perspective.

Sunil Singhania, CIO of Reliance Mutual Fund, had earlier told Business Standard that there was big potential for investing in financial assets, including equities. “Net investments by equity fund managers have been the highest in history. But we have merely scratched the surface. India’s total household savings are 25 per cent of a $2 trillion economy size, which is $500 billion. If even five per cent of it were to come to equity, it’s $25 billion. So, the sky is the limit,” he said.

Most of the investment by fund managers have gone to cyclical stocks, including banks and automobiles. Investors are betting on themes that are likely to benefit from the new government’s reform push and recovery in the economy.

The size of the mutual fund industry has crossed Rs 12-lakh-crore mark and the sector targets to reach an asset size of Rs 20 lakh crore by 2020. The equity assets have soared to nearly Rs 3.5 lakh crore.