Retail sails high on low market tide

Retail sails high on low market tide
Highlights

Retail sails high on low market tide. In a significant change in attitude for investments, the retail investors are showing interest in the stocks. The small investments have slowly attracted to mutual funds thus raising its share in the months July-August, although the stock markets have posted its worst month in the last four years.

Small investors are ploughing money into stocks as part of long-term allocations via monthly installment plans

Mumbai: In a significant change in attitude for investments, the retail investors are showing interest in the stocks. The small investments have slowly attracted to mutual funds thus raising its share in the months July-August, although the stock markets have posted its worst month in the last four years.

Indian households own only about $400 billion in equities, compared with $1.1 trillion in bank fixed deposits and $1 trillion in gold - Morgan Stanley

According to data released on Monday by Association of Mutual Funds in India, the investment into equity mutual funds rose 63 per cent to 96.25 billion rupees ($1.44 billion) last month from July, marking a 16th consecutive month of inflows.

The data is likely to provide some comfort after a tough August for equities as turmoil in China spread to global markets. Nifty fell 6.6 per cent last month, its worst performance since November 2011.

The purchases by retail investors contrast sharply with the behaviour of foreign investors who sold a net 168.77 billion rupees ($2.53 billion) in Indian shares in August, their highest monthly sales on record. Fund managers say many retail investors are ploughing money into stocks as part of long-term allocations such as via monthly installment plans.

Indian households own only about $400 billion in equities, compared with $1.1 trillion in bank fixed deposits and $1 trillion in gold, according to Morgan Stanley. "What you're going to now see over the next five years will be very different from the last fifty years, in terms of the allocation of saving of households towards various asset classes," said Anand Shah, executive director & chief investment officer at BNP Paribas Mutual Fund.

The data has been keenly awaited as investors sought evidence that retail investors will help counter any continued sales by foreign investors amid deteriorating outlook given worries about China's economy and expected US interest rate hikes.

But domestic factors are seen as more positive, given continued optimism that Prime Minister Narendra Modi will implement policy reforms, and expectations the Reserve Bank of India will cut interest rates for the fourth time this year to help kick-start a struggling economy.

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