Santacruz electronics export processing zone, Government office in Mumbai, India

New Delhi, July 5 An analysis of inflows into equity MFs during the previous property upcycle of FY04-14 shows that even as investor appetite for property purchase increased substantially during FY04-08, equity market investments stayed high, foreign brokerage Jefferies said in a report.Housing + equity investments as a percentage of household savings is 50-60 per cent and hence one rising doesn't mean the other falls. Share of gold has been trending down recently and can decline further, the report said.The post-Covid surge in direct retail activity has normalised as evident in the non-institutional share of market volumes which is off 12 ppt from peak. Data on 'active' accounts from NSE shows a 22 per cent decline in these accounts by May 2023 from the mid 2022 peak. Also, while the past few weeks has seen mid-cap stock volumes rise, they are still to reach levels associated with mid-cap index peaks.The net inflows into domestic MFs have averaged $0.5 billion during April-May 2023, down 80 per cent YoY. The lump-sum (non-SIP) component of flows has seen net outflows for seven of the last 12 months.The report said that this period of weak lump-sum flows has broadly coincided with weak returns on Tr-12-month basis. The outflows though have not been large, and with the midcap indices making a new high recently, discretionary domestic flows could return soon.The report said that the structural flows from retail to the equity markets is at $30-35 billion/annum.The participation of retail via MFs has seen the monthly investing (SIP) accounts rise 19 per cent YoY to 65 million and monthly flows at $1.8 billion, +20 per cent YoY. The SIP flows account for 60 per cent of the structural domestic equity flows. Insurance, and pension fund (EPFO + NPS) inflows are also large ($10 billion+/annum) and rising.The government mandates that 15 per cent of the annual gross inflows in the pension scheme (EPFO) must invest in equity markets, drawing net inflows of ~$5 billion/annum. The equity allocation by insurance companies adds another $5 billion.The brokerage’s analysis of India'shousehold savings data shows that equity holdings and flows as a percentage of household assets and annual savings is less than 5 per cent.Indeed, just realloction within the savings pie is enough to sustain retail flows in the market, for e.g., SIPs are just 10 per cent of annual incremental bank deposits; and given the longer-term benefits of the former, can gain further share, the report said.Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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