Domestic mutual funds (MFs) have continued to invest in the Indian stock market with their net flows into equities surpassing the ₹1.5-trillion mark for the second consecutive year, reported Business Standard.
The funds injected a net ₹1.53 trillion into equities till March 1, 2023, the capital markets regulator data shows, as compared to ₹1.72 trillion in FY22.
Since FY15, mutual funds have been net buyers of equities, barring in FY21, when they sold a net ₹1.21 trillion. In the nine financial years between FY15 and FY23, they have pumped in a massive ₹6.90 trillion in the Indian equity market, the data shows.
Swarup Mohanty, chief executive officer and director, Mirae Asset Investment Managers (India), believes this optimism is stemming from the strong economic growth in India, which in turn is driving flows into the equity markets.
“Another strong reason for the continued strong flows is the change in behaviour of Indian retail investors, who have been continuously pumping money into MFs via the systematic investment plan (SPI) route over the years. That has changed the structure of the Indian equity market. All this is giving some comfort to the markets on every downside,” Mohanty added.
Foreign portfolio investors (FPIs), on the other hand, have recorded a net outflow of ₹36,538 crore in the equity segment so far in FY23. This comes after a dismal FY22, when they pulled out ₹1.42 trillion from the Indian equity market, the NSDL data shows.
On a comparative basis, while mutual funds pumped in ₹3.25 trillion in domestic equities in the past two years (since March 2021) despite market volatility, foreign investors have pulled out ₹1.78 trillion during this period.
As regards the foreign flows, analysts at BNP Paribas remain cautious and see the risk of flight of capital from Indian shores to more lucrative destinations continuing in 2023. China’s reopening and an increase in term deposit rates, they said, were likely to impact the flows into Indian equities.
“FII holdings in the Indian market are close to the lowest in a decade. With China reopening and India’s elevated valuation premium, we see a risk of FII outflows continuing in 2023,” said Kunal Vora, head of India equity research at BNP Paribas.