Investor of last resort? Stock MF inflows jumped 63% in Aug

Investments into Indian mutual funds surged in August from July even as share markets posted their worst month in nearly four years, signalling the continued retail support for equities despite a deteriorating outlook.Investments into equity mutual funds rose 63 percent to Rs 96.25 billion (USD 1.44 billion) last month from July, marking a 16th consecutive month of inflows, according to data out on Monday from Association of Mutual Funds in India.The data is likely to provide some comfort after a tough August for equities as turmoil in China spread to global markets: Nifty fell 6.6 percent last month, its worst performance since November 2011.The purchases by retail investors contrast sharply with the behaviour of foreign investors who sold a net Rs 168.77 billion (USD 2.53 billion) in Indian shares in August, their highest monthly sales on record.Fund managers say many retail investors are ploughing money into stocks as part of long-term allocations such as via monthly instalment plans. Indian households own only about USD 400 billion in equities, compared with USD 1.1 trillion in bank fixed deposits and USD 1 trillion in gold, according to Morgan Stanley."What you're going to now see over the next five years will be very different from the last fifty years, in terms of the allocation of saving of households towards various asset classes," said Anand Shah, executive director & chief investment officer at BNP Paribas Mutual Fund.The data has been keenly awaited as investors sought evidence that retail investors will help counter any continued sales by foreign investors amid a deteriorating outlook given worries about China's economy and expected U.S. interest rate hikes.But domestic factors are seen as more positive, given continued optimism that Prime Minister Narendra Modi will implement policy reforms, and expectations the Reserve Bank of India will cut interest rates for the fourth time this year to help kickstart a struggling economy.