Mutual fund houses made an investment of over Rs 7,000 crore in domestic equities in January, even as foreign investors pulled out a massive Rs 5,200 crore. The sell-off by foreign portfolio investors (FPIs) from the Indian equity markets has provided an opportunity to mutual fund managers, experts believe.
According to the data available with Sebi and depositories, fund managers bought shares worth Rs 7,160 crore on a net basis last month. On the other hand, FPIs pulled out Rs 5,264 crore from equities. Investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP), market experts said.
The fund houses believe that the uptrend may continue in the coming months too as large amount of flow is expected through the SIP route. SIP is an investment vehicle that allows investors to invest in small amount periodically, instead of a lump sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.
The outflow by FPIs from equities indicates their 'wait and watch' approach ahead of the general elections. FPIs are taking cautious or 'wait and watch' stance towards India, which they have been maintaining for a long time, said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar Investment Adviser India.
He further said the focus would continue to be on economic growth and the general elections. Other factors such as movement in crude prices and currency, which would have a bearing on the country's macro-environment, and worries over global trade war will continue to guide the direction of FPI flows, Srivastava added.
Echoing similar views, Bajaj Capital Senior VP and Head Investment Analytics Alok Agarwala said escalating trade disputes, domestic macroeconomic concerns viz, weakness in currency, movement of crude oil prices, the trade deficit would weigh on inflows from FPIs.
(With inputs from agencies.)