The business of the Indian investors has experienced a paradigm shift and investors have relocated from gold and real estate to financial means such as mutual funds and insurance products, says Pramod Gubbi, the Head of Equities at Ambit Capital.
Investors drove in an overwhelming 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 incredible, given that the investors have put 60% more money than the previous month of July wherein the equity inflows totalled Rs 12,727 crores.
According to the research done by Deutsche bank last month, “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 continuing trend. 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 all black money attack, the demonetization, everything pretty much goes in that direction.”
Insurance, too, is likely to gain a lot of traction in the coming months. S Ramesh of Kotak Investment banking believes that India Inc is ready to raise Rs 1 lakh crore in upcoming 12 months. Out of this, Rs40,000 crore is set to be obtained by the insurance companies. With these Insurance companies making a venture into the capital markets, the asset allocation of mutual fund managers will undergo a change, he said.
He further added “Close to 33% of the domestic and international money lies 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.”