Mutual funds infused 116 billion even as quitting FPIs roasted stock markets

Last Updated: Thu, Oct 11, 2018 09:16 hrs
Mutual Funds (Reuters image)

The last week, Indian stock markets tumbled causing investors on Dalal street a major scare. In fact, the BSE Sensex was down by at least 1600 points.

Analysts said that in trading sessions market capitalisation of stocks listed on the Bombay Stock Exchange had lost Rs 8 lakh crores.

And those of you who thought that the market-crash last week had made only retail investors poorer, you are sadly mistaken. Mukesh Ambani's wealth slipped by $50.7 billion (28 August) to $39.5 billion (4 October). Losers also included billionaires such as Gautam Adani, Kumar Mangalam Birla among major industrialists.

Analysts pointed one of the major cause for the market behaviour to a pull-out made by Foreign portfolio investors.

On Wednesday data provided by the Securities and Exchange Board of India showed how disastrous the situation would have been in the event mutual fund managers did not infuse investments.

FPIs were reported of pulling Rs 108.25 billion from Indian equities. Mutual Fund houses made an investment of Rs 116 billion.

One may say that the markets were saved by mutual fund houses. But in other words, there is also the possibility that mutual fund managers tapped shares at the opportune time.

Investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP).

AMFI's (Association of Mutual Funds in India) Chief Executive NS Venkatesh was quoted as saying in a report, "Despite the market volatility and the credit event which occurred, the flow in the equity segment of the market from the retail investors has been positive."

Morningstar's Analyst Himanshu Srivastava said that the behaviour could be owing to a difference in perspective between FPIs and domestic fund managers.

He explained, "For FPIs, India is just another investment in their portfolio. They continuously evaluate India against other comparable markets and see what investment proposition it has to offer. They will not hesitate in trimming their exposure to India if it does not fare well on the risk-reward profile."

He added, "Hence, due to deteriorating macro factors and increasing tension over global trade war, FPIs have been trimming exposure to India over the last few months"

Meanwhile, another report, from AMFI, said AUMs of mutual funds tapered to a monthly loss of Rs 2.3 lakh crores in September. One is left wondering if there is something that holds the two data-points together. More on the Mutual Fund loss here.