MF investment in equities halves on low participation from retail investors

Mutual fund investment in stock markets halved to Rs 55,700 crore in the first 10 months of the year because of lower participation from retail investors.

Fund managers had bought shares worth about Rs 1.12 trillion during January-October 2018, according to the data provided by the Securities and Exchange Board of India (Sebi).

"Inflows from retail investors into mutual funds have slowed compared with a year ago. As a result, mutual funds deployment into stock markets has lowered," said Vidya Bala, co-founder of Primeinvestor.in

"Despite markets moving to new highs, since the rally is restricted to select stocks, retail investors have not seen any positive impact on their wealth. Unless retail appetite increases this trend may continue," she added.

Omkeshwar Singh, head of mutual fund distribution business at Samco said although the overall flow per month in equities has been positive, if we remove Systematic Investment Plan (SIP) inflows than such inflows turned into negative, therefore the investment has been lower.

"The investments through lump-sum net of redemptions have been negative," he added.

SIP is an investment vehicle that allows investors to invest small amounts periodically instead of a lump-sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.

Of Rs 55,700 crore infused in this year, most of the investment in equities during the year came between July and September. Fund managers infused a net sum of Rs 43,500 crore during the period. However, foreign investors pulled out Rs 22,400 crore in these three months.

The sell-off by foreign portfolio investors (FPIs) in the Indian equity markets provided an opportunity to mutual fund managers, experts believe.

On the other hand, fund managers withdrew a collective sum of Rs 12,000 crore from equities in March and April.