Indian investors are salting away their savings into stocks for the longest stretch ever.
Mutual funds showed net buying of shares for a record 10th straight quarter in September, data from Bloomberg show. Households are putting more money into financial assets as slowing inflation reduces the value of gold, a traditional favorite.
Shibabrota Konar exemplifies the shift. He’s stopped buying exchange-traded funds backed by gold and now invests at least 15,000 rupees ($225)a month into stock funds. A jump in industry-wide accounts to a record 50 million at the end of August show he’s not alone.
Retail investors like Konar have been the main contributors to mutual funds’ growth since Prime Minister Narendra Modi took office in May 2014with the biggest mandate in three decades. Assets with money managers swelled to an unprecedented 16 trillion rupees ($241 billion) in August, with stock plans making up 32 percent of the pie. The proportion was 20 percent in April 2014, data from the Association of Mutual Funds in India show.
Analysts cite several reasons for the trend:
1. Investors seeking higher yields as returns from gold and real estate stagnate.
2. Government policies spurring prospects for economic and corporate earnings growth.
3. A generation of millennial investors ready to take on risk.
4. Inflation-adjusted returns turning positive in the past two years after staying negative for most of the previous five years.
Equity funds have attracted 1.63 trillion rupees from April 2014 through August this year, according to AMFI data. That’s more than the 934 billion rupees that Deutsche Bank AG estimates funds got between January 2002 and April 2014.
Reference : Bloomberg
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