Mutual Funds pump record money in stocks in FY15

Good times are back for India's equity fund managers after six long years. They pumped in a record sum in shares in the financial year 2014-15. With surplus cash inflows from investors throughout the year, they never had a dearth of money to buy stocks.

Their net investment touched a whopping Rs 40,000 crore. This is not only the highest in sector's history but almost equivalent to what they put in the last bull run from 2003-04 to 2007-08 during which BSE's benchmark index Sensex rose from levels of 3,200 to 20,800.

Interestingly, for the first time in last six years the net investment figures were in the positive territory. The key benchmark indices gained nearly 25% in FY15. Prior to this, from 2009-10 to 2013-14, fund managers had collectively sold equities worth Rs 75,000 crore as investors kept on redeeming units whenever the indices hovered around previous peaks.

According to Prashant Jain, chief investment officer (CIO) of HDFC Mutual Fund, "The worst on the economic front in India is clearly behind us. GDP (gross domestic product) growth is improving, the current account deficit has narrowed sharply, the fiscal deficit is slowly but surely moderating, inflation is steadily coming with visible moderation in the key constituents of food and fuel."

He further added that lower interest rates are, thus, a natural corollary over time. "Given the likely recovery in the capital expenditure cycle over the next few years, India should emerge as the fastest growing economy," he said.

Agrees S Naren, CIO of ICICI Prudential Mutual Fund who sees India as the best place to be in from at least a three years perspective.

The year saw a robust sales of equity schemes at about Rs 1.31 lakh crore till February, 2015. While over 2 million new equity accounts were opened during the year. Though the key indices have already gained about 25% the flows of money in equity segment continues to remain strong.

Sunil Singhania, CIO of Reliance Mutual Fund had told earlier told Business Standard that there was big potential for investing in financial assets, including equities.

"Net investments by equity fund managers have been the highest in history. But we have merely scratched the surface. India's total household savings are 25% of a $ 2 trillion economy size, which is $ 500 billion. If even five% of it were to come to equity, it's $ 25 billion. So, the sky is the limit," he said.

Most of the investment by fund managers have gone to cyclical stocks, including banks and automobiles. Investors are betting on themes that are likely to benefit from the new government's reform push and recovery in the economy.

The size of the mutual fund industry has crossed Rs 12 lakh crore mark and the sector targets to reach an asset size of Rs 20 lakh crore by 2020. The equity assets have soared to nearly Rs 3.5 lakh crore.