Have retail investors figured out the market move? It seems so – Times of India

MUMBAI: Retail investors in equity mutual funds are showing signs of maturity. In October and November, as both sensex and Nifty touched new highs on a regular basis, the investors took out a record amount of money — over Rs 15,400 crore — from equity funds. They reinvested this into short-term debt funds, which are comparatively less volatile than equities.
Compare this with the huge net buying of stocks — aggregating over Rs 17,900 crore — in March and April this year, when the markets had crashed and then showed some recovery.
According to Association of Mutual Funds in India (Amfi) chairman Nilesh Shah, the investors — retail and HNIs — are definitely being more mature, although “it’s not a homogeneous crowd … not everyone is rational”.

This matured behaviour is also showing up in the data. During November, investors took money off every type of pure equity schemes as large-caps led with a net outflow of Rs 3,289 crore, followed by multi-caps (Rs 2,842 crore) and value & contra funds (Rs 1,323 crore).
At the same time, November recorded net inflows of Rs 27,108 crore in low-duration funds, followed by short-term funds (nearly Rs 13,100 crore) and corporate bond funds (almost Rs 11,100 crore), Amfi data showed.
It also shows outflows from overnight and liquid schemes. However, most investors in these funds are corporates and this reflects their demand to meet cash flow needs. On the other hand, over 95% of equity fund investors are individuals.
In March, when the markets were hitting multi-month and multi-year lows on a regular basis, almost every type of equity scheme had recorded net inflows, while most debt funds recorded net outflows.
According to analysts, this behaviour — of buying at markets’ lows while selling when markets are at a high and valuations look stretched — is being observed only in the past few years. According to Morningstar India director (fund research) Kaustubh Belapurkar, there are definite signs of increasing maturity from Indian investors.
“Equity funds witnessed an uptick in inflows when the markets corrected in March. We have witnessed similar such activity over the past two-three years, whereby the inflows into equity funds increased whenever markets have corrected. On the other side, we have also seen outflows increase from equity funds as markets made new highs, as investors looked to rebalance their equity portfolio back to their desired asset allocation levels.”
Historically, Indian investors bought when markets were high, endured pain as indices slid to multi-year lows from those highs, and lost patience to hold on to their investments and sold as markets bottomed out.
According to Axis MF MD & CEO Chandresh Nigam, investors’ maturity could be gauged if they don’t get into an asset class at the wrong time and again get out at the wrong time. Nigam said the recent actions of equity fund investors have been “reasonably rational”.
“Investors are putting money in mutual funds through the SIP route. During panic situations, they are not going out. However, not 100% of the investors are matured enough…but they are improving.”
Amfi data shows monthly inflows are hovering at the Rs 8,000-crore mark since December 2018.