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Inflows into MF equity schemes dip as retail investors venture directly into equities

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Amid the bearish undercurrent, the inflow into equity mutual fund schemes has been steadily declining, while benchmark indices continue to reach new highs. This trend is driven by investors’ growing preference for direct investment in individual stocks.

The net equity inflow touched a new peak of ₹1.64-lakh crore in FY22 after registering an outflow of ₹25,965 crore in the Covid-hit FY21. However, it slipped 11 per cent last fiscal to ₹1.46-lakh crore compared with FY22. Further, it plunged 68 per cent in the June quarter of this fiscal to ₹18,358 crore against ₹49,918 crore logged in the same period last year, according to data sourced from the Association of Mutual Funds in India.

Satish Pawar, CEO, Wise Wealth Advisors, said most of the retail investors, who entered the equity market through mutual funds at peak of post-Covid bounce back, have not been able to reap big returns and have ventured to invest directly in equity markets.

New additions

This was evident from the fact that new demat accounts opened with two leading depositories, CDSL and NSDL, have been hitting a new high in last few months to touch a 18-month high of 2.9 million last month, he said.

The new additions in July were up 26 per cent on-month and were up 45 per cent compared to the last 12-month average of 2 million. The total number of demat accounts have touched a high of 123.5 million.

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The benchmark Sensex and Nifty gained 2.8 per cent and 2.9 per cent as foreign portfolio investors pumped in ₹33,994 crore, taking their five-month buying tally to ₹1.6-lakh crore. The Nifty Smallcap 100 index and Nifty Midcap 100 indices rose 8 per cent and 6 per cent, respectively, last month.

Cautioning retail investors, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said stubborn inflation globally is a cause of worry for the markets as prolonged high-interest rates could pose a threat to economic growth and subsequently the equity markets.

He said the outlook on the global macro environment is crucial now as the US Federal Reserve’s unprecedented action on the interest rate cycle indicates two more successive rate hikes.

The current Fitch factor has paused the rally in the markets and ongoing war in Ukraine is also influencing Indian markets more on the negative side, he added.





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