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Rising Dominance of Mutual Funds
Feb 8, 2018

February month hasn't been good for investors globally. The market entered a meltdown mode in February with the Dow Jones Industrial Average seeing its biggest one-day point drop in history. Indian markets witnessed selling pressure this month following the introduction of long term capital gains (LTCG) tax and widened its fiscal deficit target. Not to mention, hardening yields and weak global equity market also impacted Indian market.

During such times, it is important to check the fund flows from foreign portfolio investors (FPIs) and domestic institutional investors (DIIs). FPIs have historically been the dominant players in the Indian markets. However, the below chart shows a changing pattern in the past couple of years. DIIs, particularly, mutual funds (MF) is stepping up thereby reducing the dependence of foreign inflows.

New investors haven't seen this sort of volatility that the markets are witnessing in the recent times. In fact, 2017 was one of the least volatile years for the domestic market. The real test is if the fund flow continues in such a volatile market. Should the inflow slow down, it will impact MF investment flowing into Indian markets. It will be interesting to see how mutual fund investors react under these conditions.

Data Source: Business Standard 2018* - FPIs till 5th Feb, MFs till 2nd Feb.

This Chart Of The Day was published in The 5 Minute WrapUp - Follow India's Super Investors to Make Big Money in the Market Crash

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