A Good Time To Invest? Record Money Pumped Into Mutual Funds

Investors pumped in a record Rs. 3.43 lakh crore in mutual funds (MFs) in 2016-17, mainly into income and liquid schemes. Out of this Rs 70,000 crore was invested in equity and equity-linked schemes. According to the Association of Mutual Funds in India (Amfi) data, a net of Rs. 3,43,049 crore was invested in all mutual fund schemes last fiscal ended March 31, more than double of Rs. 1,34,180 crore seen in 2015-16. This was the highest investment in MF schemes since 1999-2000. The data for entire fiscal prior to this period is not available with Amfi.

Meanwhile, the Sensex and Nifty are in uncharted territories and are making new highs on a daily basis. The Sensex is near 30,000 levels a peak which the Sensex is failing to hold on a closing basis. Retail participation is at record highs in equity markets.

AK Prabhakar, head of research at IDBI Capital Markets & Securities says that the Indian markets are at an inflexion point and are going through a cosmetic change.

He says, "GST is getting introduced and demonetisation has made businesses run on cash weaker. Cash component will come down and now it will come into shareholders pocket rather than going into promoters' pocket and that is re-rating the stock market."

"Market is going through cosmetic change which is something similar which we saw during Narasimha Rao's government. We are at an inflexion point and entering a new era wherein unaccounted economy is becoming an accounted economy which will be reflected in stock market, it will be reflected in taxes we pay and it will be reflected in GVA numbers. That change is not captured by the market and once it is captured the markets can double from current levels," adds Mr Prabhakar.

However, Mr Prabhakar points out that currently Indian stock markets are very expensive and may remain so going ahead.

Mr Prabhakar says, "Valuations are very expensive and Nifty earnings have been stable for three years and capacity utilisation is improving which will lead to better earnings from the second half of current financial year there may be 1-2 quarters of pain but earnings momentum will catch up with valuations."

Meanwhile, Sanjiv Bhasin, executive vice president - markets & corporate affairs at India Infoline, says markets could be headed for a correction soon.

He says, "Results will not be as good as expected and so investors should be watchful.  Tops are being made and there can be upmove of 50-100 points in Nifty but 500 point correction is expected. So investors should wait for decline to enter or invest through SIPs."