With central banks in rich countries pumping large amounts of liquidity to tide over the covid crisis, it’s likely that a portion of this money would have found its way to emerging markets, such as India, in search of returns
Though Indian stock markets have staged a hearty rebound, the pressure on mutual funds (MFs) only seems to be growing. According to data issued on Monday by the Association of Mutual Funds in India, equity funds saw net outflows of ₹2,480 crore in July, the first in more than four years. Flows into debt funds, however, saw a huge jump to ₹91,392 crore.
If the withdrawal of money from funds that invest in shares on people’s behalf is a surprise, it’s because stock prices have been buoyant in recent months. This is due to both the reported surge in retail participation as well as investments by foreign portfolio investors. With central banks in rich countries pumping large amounts of liquidity to tide over the covid crisis, it’s likely that a portion of this money would have found its way to emerging markets, such as India, in search of returns. As seen in the past, foreign inflows are enough to push stocks up and attract locals to the resultant rally. But a large number of households in India are probably short of cash right now, what with all the job losses and salary cuts. As with provident funds, so too with MFs. Most people seem to be raiding their nest eggs.
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