Domestic and foreign institutional investors, who together pumped in over Rs 1 lakh crore in the past one year, are likely to be active in the India equity market.
According to experts, flows into India-focused Exchange Traded Funds (ETFs) and emerging market funds are seeing strong inflow in the recent months and these funds are expected to make large purchases in the domestic market.
Even domestic mutual funds, who have invested close to Rs 54,734 crore in the last one year, are seeing strong inflows into their equity funds especially through SIP route.
So far this year, mutual funds have put in Rs 17,000 crore, with April alone accounting for Rs 8,000 crore, while FIIs have invested Rs 42,000 crore.
Foreign funds pumped in $1.7 billion into India during March — the highest flows among the emerging countries as per foreign fund-flow tracker report by Kotak Institutional Equities. The strong fund flows for March were largely driven by Exchange Traded Funds (ETFs) inflows of $1.1 billion. Non-ETF fund inflows stood at $620 million. The listed funds — passive exchange-traded funds (ETFs) and active non-ETFs — generally account for a large part of foreign portfolio investor (FPI) activity in India. For listed fund flows to emerging markets, India is followed by Taiwan and Brazil, which have seen listed foreign fund inflows to the tune$ 937 million and $785 million respectively.
The report also noted that allocations to India and China constitute more than one-third of the average Asia fund portfolio (excluding Japan). “Allocation to India by Asia ex-Japan funds has marginally decreased to 13.6 per cent,” the report said. “Allocation by Asia ex-Japan ETF funds to India increased to 9.6 per cent from 9.1 per cent in the previous month,” it added.
In the case of domestic mutual funds, equity AUM rose for the fourth consecutive year in FY17 to touch a new high of Rs 4.8 lakh crore, led by a rise in market indices and higher equity schemes sales. Equity AUM as a percentage of India’s market capitalisation increased 40bp year-on-year to 4 per cent in FY17.
