MF investments in equities, debt markets in 2014 at all-time high

New Delhi: This year saw equity markets stage a spectacular return. Predictably, the Rs.11 trillion Indian mutual funds (MFs) industry’s investments in equity and debt markets have hit an all-time high. MFs invested more than Rs.21,000 crore (on a net basis) in equity markets in 2014 and Rs.5.94 trillion in debt markets, as per data released by the capital markets regulator, Securities and Exchange Board of India (Sebi)—their highest yearly allocation ever. That’s not much of a surprise considering that equity markets are on a high; they have returned around 29% in 2014.But the question is this: are investors making money?

According to the figures released by the Association of Mutual Funds of India (Amfi, the MF industry trade body), equity funds have seen a net inflow (more money came in than went out) of Rs.45,379 crore in 2014. In the past five years, this is just the second time that equity funds have seen a net inflow. In 2010, 2012 and 2013, equity funds saw a net outflow (more money went out than came in). Amfi has been disclosing the inflows and outflows figures since 2005; the current year’s net inflow is the highest. So Amfi data shows that at least investors are putting money in equity funds now.Ultimately, MFs may invest incrementally in the markets, but the next question is this: are investors really making money or is it just a section of investors who are benefiting?

A look at the equity folios across fund houses shows that while high networth individuals (HNIs) have been consistently increasing their investments in equity funds, retail investors entered the markets late. As per Amfi figures, retail equity fund folios dropped to a low of 290,000 as of September 2014, down from 306,000 as of September 2013. Amfi discloses the folio data in March and September every year. The smart HNI investors (those who invest Rs.5 lakh and above as per Sebi’s definition), however, saw the opportunity in equity markets and invested more. In the same period, their folios in equity funds went up to 494,000, up from 340,000. “The HNIs are more literate than the retail investors and they have been using MFs to their advantage by staying invested for the long run. The retail investors, typically, take time to come into the fold”, says Pankaj Murarka, head of equity funds at Axis Asset Management Co. Ltd.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.