The euphoria over the election results took markets to new heights in the last week, but it is yet to provide succour to mutual funds as there are no signs of inflow from retail investors so far.
“The market up move has not been a one day phenomena,” said Anil Kumar, chief executive officer, Birla Sun Life Mutual Fund. “It had been growing steadily since more than a month. Poll results and the resultant surge in markets on Monday only reinforced what has been happening over the month.”
“Retail investors take more time to warm up to situations and hence the inflow is likely to be slower from them,” Kumar said. However, mutual fund houses are confident of increase in flow as capital always chases good return.
“April-May saw increased inflow in to equity with investors steadily turning positive on equity,” Kumar said. “I have not seen an increase in inflow yet. The valuation of equity funds has also gone up. If the momentum continues, up move will be there,” said Achal Kumar Gupta, managing director, SBI Mutual Fund.
As per the Securities and Exchange Board of India (SEBI), on May 15, net investment of mutual funds in equity was around Rs 395.9 crore dropping to Rs 97.4 crore on May 21. As against this, net investment of mutual funds in debt has almost tripled from Rs 204.1 crore on May 15 to Rs 611.9 crore on May 21.
“It is unlikely that people who were investing in debt during the down cycle would turn to equities. They are two different kinds of investors and hence the shift may not happen,” said Gupta.“There are indications that if reforms continue, market rally would be sustainable.”
There are some more good news for the economy as funds are investing in corporate bonds, making liquidity available to enterprises. Number of trades in corporate bonds on Bombay Stock Exchange has increased from 1,372 on May 15 to 2,041 on May 21. The total amount traded tripled from Rs 84.6 crore to Rs 264.7 crore during the respective period.