Wondering why your mutual fund investment is not growing? This might be the reason
October had seen the worst sell off to the tune of Rs 28,921 crores. A tepid inflow of Rs 5,981 crores and Rs 3,143 crores followed in November and December.
Those who have invested into the equity markets can easily understand why their investment is not growing manifolds as promised by their investment planner at the time of investment because it's easy to link their growth with the beer or bull run into the markets. However, there are some ETF and other mutual fund investors who are hesitant to high-risk investments. They are unable to connect their low income in their investment. For them the recent outflow of the foreign funds from the Indian equity and bond markets is the major reason, says markets and investment experts
Speaking on the matter Sandip Jabuani, Research Analyst at the Narnolia Financial Advisors said, "FII's in the third quarter have been net sellers in the Indian equity market. The month of October had seen the worst sell off to the tune of Rs 28,921 crores. A tepid inflow of Rs 5,981 crores and Rs 3,143 crores followed in November and December. The Net selling by FII's had been on the backdrop of volatile crude and depreciating rupee. The strengthening dollar and rising US yields also aided to the cause." He said that out of the 425 BSE companies to share the shareholding data, 256 have reported FII's to be sellers and only 169 companies have seen FII's to be net buyers. The worst hit sectors by FII's selling pressure have been the private commercial banks, Metals and materials and Information technology — sectors that fund managers of various mutual funds (which are equity-linked) love to invest.
On where does these foreign funds have been pumped by the FII after fishing out their portfolio investments from the Indian markets Anindya Banerjee, Research Analyst — Derivative and Currency at Kotak Securities told Zee Business Online, "Majority of the FII being fished out from the Indian equity and bond markets have gone to Japan (see the Bloomberg graphic above)." He said that investors are in limbo as the Lok Sabha elections are around the corner and much depends upon the election result.
"The outflow of foreign funds from India is an indication that the FIIs want the safety of their money and their decision to square off their position into the Indian markets but it won't last for long as the rupee is expected to gain against the US dollar," said Anindya of Kotak Securities. He said that strong rupee would reflect the status of strong Indian economy and would attract the FIIs to look back to India post elections if not before that and in such a scenario it would be Indian equity and the bond markets that would attract the most of FII investment in India.
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