MF investments in equities rise 63% as FPIs sell

Mutual fund investments into equities surged in August as equities registered their worst losses. MF investments into equities rose 63 per cent to Rs9,625 crore in August compared to levels in July, marking a 16th consecutive month of inflows, according to data released by the Association of Mutual Funds in India (AMFI).

In fact, mutual fund investments into equities surged in August as share markets posted their worst month in nearly four years, signalling the continued retail support for equities despite a deteriorating outlook (See: Sensex plunges 1,624 pts, investors' wealth down Rs7,00,000 cr).

It is the support from local funds that provided some cushion to equities at a time when foreign funds withdrew heavily from Indian market after the turmoil in China and worries over US rate hike spread panic

Foreign investors sold a net Rs16,877 crore ($2.53 billion) in Indian shares in August, their highest monthly sales on record.

Fund managers say many retail investors are ploughing money into stocks as part of long-term investment via monthly instalment plans.

Indian households own only about $400 billion in equities, compared with $1.1 trillion in bank fixed deposits and $1 trillion in gold, according to Morgan Stanley.

Markets are expecting additional support from pension funds like Employees Provident Fund Organisation (EPFO) with the relaxation in investmemt norms for PF subscriptions.

Commentators say, market expectations of a possible rate reduction by the Reserve Bank of India could help kickstart investments in a struggling economy.