Retail investors are getting smarter. Rather than getting unnerved by the bloodbath in the stock market, they are apparently turning into an opportunity. They are buying into equity, albeit through mutual funds.
There are indications that the daily inflow into equity-based mutual funds is expected to increase significantly. “Retail applications for the existing and new fund offers (NFO) increased substantially on Tuesday,” said Vikrant Gugnani, President and Chief Executive Officer of Reliance Mutual Fund that manages Rs 80,000 crore in assets.
Domestic mutual funds have been net buyers through Monday and Tuesday despite tumbling share prices.
“The investors are getting matured. The industry has seen profit booking on a regular basis, but in a falling market there always is a reversal and more funds come into equity,” said V P Chaturvedi, CEO of Tata Mutual Fund.
Their confidence rests on the strong fundamentals of the Indian economy, which has average more than 8.5 percent growth in the past four years, boosting corporate profits and personal incomes.
The recent fall in the stock market offers tremendous opportunities for selecting some of the stocks that have a domestic bias, such as infrastructure, capital goods and other sectors, said Vijayan Krishanamuthy, CEO of JP Morgan Asset Management Company.
At the current level, Sensex is trading at around 17 multiples on 2009 earnings, experts said. And if the value of subsidiary is adjusted, the Sensex is trading at 13 multiples on 2009 earnings, they said.