FPI, mutual fund investments soar to Rs 97,000 cr in first half of 2017

Collective funds pumped into the equity market were 3.4 times higher than last year's investments

Foreign portfolio investors (FPIs) and domestic mutual funds' investments in the equity market surged more than three-fold at Rs 97,705 crore during the first half (January-June) of the current calendar year (CY17).

FPIs invested Rs 55,908 crore and MFs another Rs 41,797 crore in equities. Their collective investment was 3.4 times higher as compared to the same period last year, when they pumped in a net Rs 28,811 crore, shows data from the National Securities Depository (NSDL).

The abundant liquidity has taken the benchmark indices- the S&P BSE Sensex and the Nifty50 on the National Stock Exchange - nearly 18 per cent higher, to become the best performing market globally on a year-to-date (YTD) basis. The rally in mid-caps and small-caps has been sharper, with the S&P BSE mid-cap and small-cap indices surging a little over 30 per cent.

Of the Rs 41,797 crore invested by MFs so far, Rs 30,328 crore or 73 per cent was made during the April-June period of the current financial year. They have been net buyers in the equity segment for the eleventh straight month, beginning from August 2016.

"Investors have matured over time and realised that professionally managed and well-regulated MFs are a safe investment avenue. That apart, the other forms of investment - real estate, gold, etc - have lost their charm. As a result, investors turned towards MFs, which then invested this corpus in equity markets," explains Nilesh Shah, managing director, Kotak Mahindra Asset Management.

Of the total that FPIs invested in the first half of CY17, almost a third or Rs 16,097 crore was through subscriptions to initial public offers of equity (IPOs) and secondary offerings. Even then, their half-yearly investment, so far, is the highest since the quarter that ended on June 2014, when they invested Rs 59,521 crore in the equity segment following the victory of the Narendra Modi-led National Democratic Alliance in the 2014 general elections.

According to analysts observing the situation closely, India will continue to attract flows from domestic and foreign investors. There could be aberrations or withdrawals in the near term but this is a normal part of the tactical shifts in allocation that all funds make periodically, they say.

"India has been and continues to be, one of the biggest overweights for global investors, who feel the country offers a great long-term story. The most encouraging feature is the surge in inflows we have seen from domestic investors. This is again going to be very healthy for the markets, since it will reduce volatility caused by global factors," says Jyotivardhan Jaipuria, founder and managing director, Veda Investment Managers.

In January 2016, FPIs withdrew Rs 11,471 crore from the Indian markets, the most in the past eight years for the first month of a calendar year, following a fall in crude oil prices, mixed corporate earnings of India Inc and rising concerns over a China slowdown.

"Things are looking up for the Indian economy. Inflation is under control and exports are slowly picking up pace. The goods and services tax (GST) implementation was a big concern but it is not likely to be as big a disruptor as was thought earlier. Except the fact that the valuations are a bit stretched, India continues to be an attractive destination for foreign investors," adds U R Bhat, managing director, Dalton Capital Advisors.

Kotak's Shah also maintains that the flows will continue unless there is a catastrophic event that shakes investors' confidence in growth and the equity markets. "Most people have realised that investing in the equity market is now a long-term game and one needs to stay put to reap a healthy return, despite any short-term pain," adds Shah.