Domestic mutual funds have seen their holding in BSE 500 companies touch a four-and-half year high during January - March 2015 quarter. Foreign institutional investors, on the other hand have seen in their ownership remained unchanged as compared to December 2014 quarter.
According to data compiled by BS Research, mutual funds' holding in the BSE-500 companies has increased to 4% in March 2015 quarter from 3.35% in the quarter ending June 2014. This is also higher compared to 3.62% at the end of September 2014 quarter and 3.92% in the quarter ended December 2014.
Since June 2014, ahead of the outcome of the general election outcome that saw Narendra Modi-led National Democratic Alliance (NDA) form the government at the Centre, mutual funds pumped in Rs 53,827 crore in equities on account of an improvement in investor sentiment.
In May 2015, which also marks the 13th consecutive month when equity mutual funds witnessed an inflow, their net investment in the equity segment stood at Rs 1975.6 crore.
Explains Lalit Nambiar, senior vice president and fund manager, UTI Mutual Fund: "A lot of this flow is on account of positive sentiment and is also a factor of how the other asset classes fare. In case of real estate and gold, returns have been disappointing. Also investors are also looking at equities from a long-term wealth creation viewpoint. Over a period of time, investors have also realised that it is more convenient and safer to invest in the markets through the mutual fund route than invest directly."
"The other big aspect is that for a long stretch, mutual funds faced competition from mis-selling of insurance products as investment products, which gave investors an alternate avenue to invest based largely on false premises. Investors have now realised the fact that insurance is not investment and hence some shift in flows have happened to mutual funds," he adds.
Of the companies that comprise the BSE-500, shareholding pattern data for 497 firms is available for the March 2015 quarter. Of this, mutual funds? stake in 142 companies increased over one percentage point each and by up to one percentage point in 131 firms. However, they reduced their stake in 148 companies, while in the remaining 76, the holding remained unchanged.
Meanwhile, foreign institutional investors (FIIs) ownership in BSE-500 companies remained unchanged at 20.35% in March 2015 quarter as compared to previous quarter. Their stake was about 19.58% at the end of June 2014 quarter.
OUTLOOK
The road ahead for flows into the mutual fund segment, analysts say, depends on how the overall market sentiment plays out. If the markets remain volatile, flows into the equity mutual fund segment may pause. However, the fall in the markets from the peak levels presents investors a good entry point from a long - term viewpoint, they add.
Ritesh Jain, chief investment officer, Tata Asset Management sees the recent fall as a 'bull market' correction that is giving a long-awaited investment opportunity to investors who did not fully capitalise during the upturn.
"Markets ran up 'too fast...too soon' without meaningful correction and a sobering was due. While we were getting cautious in March, the current correction has removed froth and it is time to add to equity allocations with an absolute return perspective. Though we may see some more pain in terms of time correction but there is opportunity to make smart money by taking calculated risk," he says.
Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India) in a recent report suggests that investors do acknowledge that India is a better emerging market (EM) story over the medium-term.
"While any further re-rating looks unlikely, we think PE (price-to-earnings) multiples may not de-rate either, given India?s relatively better macro position on the global map ? with reforms underway, lower external risks, easing inflation and a rate-easing cycle. These steps may start bearing fruit over the next couple of years, which makes for a good entry point into the market for investors with a two-three year horizon," he says.
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