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Equity Mutual funds: The Market Saviour

Research Digest | November 29, 2018

The number of folios in equity scheme stood at 4.87 Cr in October 2018 against 3.73 Cr in October 2017, indicating a 30% increase.

Despite bearish nature of the market in October 2018, the equity mutual funds have garnered positive inflows courtesy of the ever increasing SIP folio accounts which stand at 7.90 Cr in October. Mutual funds contribution through SIP route has more than doubled in the last 2 years from around 3000 Cr per month to 7900 Cr a month. In 2 years the number of folios has increased from 5.06 Cr to 7.9 Cr confirming the growing financialization of savings by Indian households. From Q2 2016 till Q2 2018 among household investments mutual funds have reported CAGR of 31% while the other household investments have seen a slower growth rate. Bank deposits (12%), Life Insurance (14%), Currency (2%) and provident funds (11%). October 2018 saw inflow of Rs 14,783 Crores to equity oriented MF schemes jumping at 31% QoQ and signaling a 8 month high inflow

Foreign portfolio investors have sold Rs 28921 Cr worth of shares in October itself which is a 2 year high sellout. Also FPIs have sold Rs 9978 Cr worth of Indian debt papers in October. This huge outflow shows the bearish mood of the FPI towards India. This huge outflow could be due to over-valuation of the Indian Stock market or rising yield rates in the US market. The month of October saw redemption in income funds to the tune of Rs.37642 Cr.


Out of the 11.5 lakhs addition of SIP folios, 10.60 lakhs were through retail segment. This kind of strong inflow by the retail market is highly encouraging for the Indian equity market as it is helping the market gain stability against the outward migrating FPI`s. As per the GDP/AUM ratio India fairs poorly among the global standards, countries such as USA and France have 102% and 76% while India accounts for only 10%.

Equity mutual funds garnered an 8 month high inflow in the month of October which is the highest in FY19 so far. While the FPI became net sellers in the month of October due to overvaluation of the Indian Stock market and rising yield rates in the United States.

While liquid funds saw a rise in the month of October, corporate investors are still doubtful about the debt funds in the wake of IL&FS episode indicating a cautious and bearish mood.

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