Retail investors biggest drivers of equity market
HYDERABAD: Indian retail investors may only be warming up to equities of late, but they have emerged as one of the largest net providers of funds to the financial system. According to the Reserve Bank of India’s latest Financial Stability Report, Systematic Investment Plans (SIP) continue to be the favoured choice among investors since FY14.
There was a growth of 454 per cent in the number of SIPs from 2013-14 to 2019-20 with the numbers increasing from 60 lakh to 332 lakh. During April-September 2019 alone, the number of folios increased by 19 lakh.
According to RBI, investments through SIPs in mutual funds are relatively more stable from the point of view of the sustainability of fund inflows. “While investments in corporate bonds offer higher returns, the risk premium may not be commensurate with the current elevated risks in the corporate bonds market,” it added.
The exposure of debt-oriented mutual fund schemes to corporate bonds as a percentage of total assets under management of these schemes stood at 42.9 per cent as on September 2019, against 44.3 per cent last year.
Similarly, the exposure of debt-oriented mutual funds to corporate bonds that have been downgraded during the last six months fell to 2.37 per cent in September 2019 from 3.63 per cent in March. The percentage touched a record high of 3.69 in February 2019, followed by a decreasing trend thereafter.
Interestingly, mutual funds continue to be the largest network providers of funds to the financial system. During April-September 2019, net inflows stood at Rs 1,64,000 crore as against an outflow of Rs 2,66,300 crore witnessed during the same period last year. Assets under management increased by 11.2 per cent as at end-September 2019 compared to September 2018.
Meanwhile, FY19 witnessed a nearly 6 per cent increase in the total capital raised in primary markets as against the previous year, but the first half of FY20 witnessed an increase of 24 per cent, according to RBI data that showed Rs 4.7 lakh crore raised during April-September 2019 compared to Rs 3.8 lakh crore last year.
During the first half of FY20, funds raised by public issues in both equities and debt and preferential allotments reduced over last year, whereas funds raised through right issues, QIPs in equities and private placements of corporate bonds saw a sharp increase.