The profile of the Indian investors has undergone a paradigm shift and investors have moved away from gold and real estate to financial instruments such as mutual funds and insurance products, says Pramod Gubbi, the Head of Equities at Ambit Capital. Investors pumped in a staggering Rs 20,362 crores into equity mutual funds in August, taking the tally of the overall industry AUM to Rs 20.6 trillion.
In August, Indian investors showed such enthusiasm at a time when Foreign Institutional Investors sold out Rs 11,000 crores. The numbers are mind-boggling, given that the investors have put 60% more money than the previous month of July wherein the equity inflows totalled Rs 12,727 crores.
In conversation with ET Now, Harsh Upadhyay of Kotak AMC said last week, “There is lack of appeal of various other asset classes. Going forward, some of the asset classes such as gold, real estate etc are unlikely to give great returns.”
In a research report last month, Deutsche bank had said, “The accelerating momentum of inflows into the equity schemes of mutual funds indicates that the financialisation of the domestic savings cycle in India — which began in earnest in 2014 — is becoming deeply entrenched.”
Pramod Gubbi believes that this is a long-term trend. In a conversation with CNBC TV18 he pointed out, “We have been very positive on a select theme, the whole financialisation of the savings, ever since the government came into play. This whole attack on black money, the demonetization, everything pretty much goes in that direction.”
Insurance is also likely to gain a lot of traction in the coming months. S Ramesh of Kotak Investment banking believes that India Inc is set to raise Rs 1 lakh crore in the next 12 months. Out of this Rs 40,000 crore is set to be raised by the insurance companies. With these Insurance companies making a foray into the capital markets, the asset allocation of mutual fund managers will undergo a change. S Ramesh explained in conversation with ET Now, , “Close to 33% of the domestic and international money is in the financial services. My judgement is 5-7% out of this will now move to the insurance sector. So, it’s exactly what the doctor ordered.”