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Unfazed investors buy more in September despite stock-market turmoil

Stock funds took in Rs 111 billion in September, the most since May


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Investors in Indian equity held tight and even bought more last month, seemingly unfazed by the selloff triggered by a tumbling currency and a crisis at a troubled lender.

Stock took in Rs 111 billion ($1.5 billion) in September, the most since May, up from Rs 83 billion in August, data from the Association of Mutual in India show.

Indian equities -- Asia’s top performers until recently -- sank into a correction last week amid a flurry of bad news, from surging and a slumping to a rout in following defaults at an Further erosion may affect flows to mutual funds, which have repeatedly buffered the nation’s $2-trillion market against the risk-off mood.

“Equity flows are supported largely by retail, a segment that typically takes a bit longer to react to situations and is not as nimble as institutional investors,” said Vidya Bala, head of research at FundsIndia. “It is possible that investors, especially new entrants who have not seen a correction like this, may panic if don’t stabilize,” she said.

Individual investors have flocked to mutual funds since Narendra Modi came to power in 2014, and own little over half of the Rs 22 trillion of industry assets, data from AMFI show. The influx of cash has been aided by policy changes, including the currency clampdown in 2016, which hurt returns from property and gold, the traditional favorites.

Continued support from local funds have kept Indian equities relatively insulated from headwinds such as the rising trade tensions between the U.S. and China -- the S&P climbed to a record in August -- and more than made up for foreign outflows. Last month, mutual funds bought Rs 116.4 billion of shares, negating sales of Rs 96.2 billion by global investors, data compiled by Bloomberg show.

“Regular contribution from should stay as they have been well educated on how investing regularly helps average out volatility,” Chakri Lokapriya, managing director at TCG Asset Management, said by phone. “Also, a market bottom always pulls in investors, and even foreigners will be back to benefit from an oversold and equities.”

First Published: Tue, October 09 2018. 06:42 IST