• SEPTEMBER 17, 1999

Retail investors return to equity schemes

Figures released by the Association of Mutual Funds of India (AMFI), reveal that fresh inflows in equity schemes are on the rise, compared to debt schemes. Investor interest in equity schemes is more pronounced at the retail level.

Rising interest in equity schemes indicates a turnaround in investor perception, since for a long time investors had shied away from putting money in equity products. Instead, they preferred income schemes, which guaranteed safety of principal and stable returns.

Rising number of applications for equity schemes over the past few months, reveals that investors are returning to equities, preferring it to debt. Even in terms of value, investments in equity schemes account for 20% of fresh inflows, compared to 10% last year. Private mutual funds like Birla Sun Life, Prudential ICICI, ING Savings Trust, Alliance Capital, have received more applications from retail investors for equity schemes as compared to last year.

Sources from the MF sector state that the retail interest is due to the rise in market indices. In addition to that, several corporate bodies are investing money in MFs to offset capital gains under Section 54 EA and 54 EB. Tax sops in the last budget for equity schemes have also fuelled demand.

Rising mobilisations by equity schemes will see increased activity in the stock markets. In a developed market, buying and selling of funds has significant impact on the stock prices. So far, this was lacking in the Indian stock markets, where only UTI's buying and selling had any impact on stock prices. However, as private sector MFs post increasing inflows, this will gradually change and private funds will influence stock markets with their buying and selling. Moreover, MFs encouraged by the performance of their equity products will come out with more equity schemes, with innovated features.

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