ET ANALYSIS -
Domestic Inflows in Mutual Funds may Continue
by Ashutosh R
Shyam & Rajesh N Naidu
`A LARGE PART of savings
invested in gold, real estate likely to shift to financial assets in next 4-5
years'
ET Intelligence Group:
The swelling flow of domestic funds in the local equity market raises concern
over its stickiness. But, data pertaining to the proportion of assets under
management (AUM) and household savings in the GDP indicate that the flow may
remain intact in the medium term.
The total AUM of
domestic mutual funds is 12% of the GDP as compared to the global average of
55%. The penetration level is even lower for equities. Equity AUM to GDP ratio
in India is 4% compared with the global average of 29%.
CLSA, an MNC broker,
estimates that the share of equity in total AUM may rise to 45% from the
current 35% in the next five years.Another brokerage, Morgan Stanley in a note
released in May 2017 said that domestic mutual funds will be the largest
contributor to a coming boom in equity savings, at $216 billion (Rs. 14
trillion) compared with $ 45 billion over the past 10 years.
Mr. A Balasubramanian,
CEO, Birla Sunlife Mutual Fund, said,
“I think inflows into mutual funds are quite sustainable. In the next four to
five years, a large part of financial savings invested in gold and real estate
may shift to financial asset class.“
He added that the
current monthly average inflow of Rs. 9,000 crore is likely to sustain. Another
key factor that signals sustained domestic funds flow is the increasing
acceptance of Systematic Investment Plans (SIP).The number of SIP accounts
increased to 1.45 crore in June 2017 from 68 lakh three years ago. In FY17, of
the total mutual fund flow of Rs. 43,921 crore, 72% was collected through SIPs.
Despite the rising
interest among households in equities, the ratio of equity saving and GDP
remains low at 0.7% compared with 2.4% in 1992 and 1.5% in 2011.Morgan Stanley
expects the ratio to grow to 1.4% of GDP by 2026. This means equity savings
could expand to $420 billion during the period.
Mr. Gopal Agrawal, Chief
Investment Officer (Equities) Tata Mutual Fund, said, “ A study conducted on the pattern of inflows in
mutual funds shows that if the past 18 months rolling returns of mutual fund
schemes are positive, inflows sustain. Besides, the posttax returns from real
estate and gold have been unprofitable and hence equities provide a good
alternative to investors.“
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