Mutual Funds Attracting Big Money from Retail Investors

Salil Panchal
Published: Sep 22, 2014 06:54:04 AM IST
Updated: Sep 17, 2014 03:17:12 PM IST

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

Mutual Funds Attracting Big Money from Retail Investors
Image: {Shutterstock}

As India’s stock markets soar to record highs, retail investors continue to pump in big money into mutual funds. Within mutual funds, balanced funds—besides equities—have seen strong monthly inflows, rising by 6.64 percent or Rs 10.76 billion to Rs 172.93 billion in August compared to July. This is the highest since January 2008.

A report from ratings agency Crisil shows that assets under management (AUM) of all mutual funds rose to a record high of Rs 10.13 trillion in August. The figure edged past the previous peak of Rs 10.11 trillion in May, according to data from the Association of Mutual Funds in India (AMFI).

Fund managers are confident that the trend will continue despite record stock prices.

“We may not be in a cheap zone anymore, but we are not in a bubble. From a valuation perspective, we are trading at 15x on year forward earnings,” says Yogesh Bhatt, senior fund manager with ICICI Prudential AMC. “Financial savings are at a 15-year-low of 8 percent of GDP compared to 11 percent in 2008. So, flows are coming back into the markets and mutual funds,” he says. 

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Balanced or hybrid, funds are viewed as “low-risk” products, which first-time or conservative investors are keen to put money into. Also, these funds are attractive because they have outstripped returns from fixed deposits by over 60 percent on an annual basis, Bhatt says.

“Balanced funds are finding takers as they invest into the rapidly accelerating mid-cap stocks,” says a fund manager with a state-run bank. “Also some balanced ‘flexi’ funds have been investing well above an expected 65 percent in equities, going up to 70-80 percent, which investors find attractive.”

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(This story appears in the 03 October, 2014 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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