The torrent of retail funds flowing into India’s equity mutual funds is at risk of abating as market returns decline, according to Jefferies Financial Group Inc.
A slowdown in households investments into local equities could further weigh on the outlook for Asia’s fourth-largest equity market, which has been sliding since late September amid a deepening earnings slowdown and an exodus of global funds. Still, equity plans took in a net $5.6 billion in January, marking the 47th straight month of inflows.
“We see the risk of this number coming off going forward as the trailing 12-month returns keep dropping,” Mahesh Nandurkar, a strategist at Jefferies wrote in a Feb. 13 note. “For now, the strong January number was a relief.”
The ongoing decline in Indian shares has erased more than $600 billion in market value since hitting a peak late-September. Yet, the sustained shift of household savings into stocks has helped domestic institutions remain net buyers, providing a buffer against foreign fund outflows exceeding $22 billion during the period.
Inflows into monthly recurring plans topped $3 billion in January, and are deemed crucial to limiting the downside for the market.
