MFs infuse 1.82 lakh cr into equities in FY23

New Delhi: Mutual funds (MFs) remained bullish on the Indian equities in 2022-23 and invested Rs1.82 lakh crore largely due to a strong interest from retail investors and the correction in the market that led to reasonable valuation.

This comes following a similar amount of Rs1.81 lakh crore invested by mutual funds in the stock market in preceding financial year 2021-22 (FY22). Before that, they had pulled out Rs 1.2 lakh crore from equities in 2020-21, according to the data with the Securities and Exchange Board of India (Sebi). Going ahead, equity outlook for the current financial year (FY24) will start improving in a couple of quarters once inflation starts coming down in the US and its central bank -- US Federal Reserve -- will change its policy stance from hawkish to dovish, Rajiv Bajaj, Chairman and Managing Director of Bajaj Capital, said. In the longer-term, India's growth prospect is higher amidst concern of slowing growth in major developed economies. "The government's favourable policies along with a focus on investment led growth (Capex Push) and improved balance sheet of banks will drive earnings growth in the near future. The PLI (Production-linked Incentive) policy and the China+1 drive, is likely to boost India's manufacturing sector and contain our trade deficit. This is the reason why most of the investors are bullish on India's growth story and what better to play it except through Indian equities," he said. According to the Sebi data, mutual funds have invested a net amount of Rs 1.82 lakh crore in the just concluded financial year. Shruti Jain, CSO at Arihant Capital, attributed a host of factors for mutual funds investment in equities, including valuations coming to a reasonable level leading to a positive sentiment among institutional investors. The Indian retail investors have warmed up to equity mutual funds and in fact, these have become their preferred investment option in volatile times. SIPs (Systematic Investment Plans) continue to be a popular investment method among retail investors.

"The correction in the equity market has also helped. This has led to an increased inflow in equity funds, and consequently, we are witnessing increased buying by mutual funds into equities," Jain said. In addition, equity is one the best investment avenues of generating inflation beating return. The performance of NSE's benchmark Nifty over the last 22 years depicts that equity is not as risky as it is perceived by the investors while it provides inflation-beating return, Feroze Azeez, Deputy CEO at Anand Rathi Wealth, said.

History shows that there have been only four instances in the last 22 years when Nifty has delivered negative average return for the respective calendar years and the CAGR (Compound Annual Growth Rate) return has been 12.86 per cent in the last 22 years, he added. In terms of sectors, financial services continued to have the biggest allocation in mutual fund portfolios followed by IT, capital goods, auto and healthcare.