Retail inflows cross Rs 1 lakh crore mark in 2024; MFs pump in Rs 2 lakh crore

Analysts are of the view that the trend clearly shows that Indian stock markets are no longer heavily dependent on FPIs as was the case few years back.

A large section of market experts may well be concerned over the current valuations of the stock market but that has not deterred retail investors and mutual funds from pumping in a huge amount of money in stocks this year.

According to NSE data, retail investors have already put in more than Rs 1 lakh crore in stocks in the current calendar year to date. Further, mutual funds have already surpassed Rs 2 lakh crore in investments in Indian equities this year, according to data from NSDL.

In addition to retail and mutual fund investments, insurance companies have invested over Rs 18,886 crore in local equities even as banks have been net sellers at approximately Rs 9,627 crore, data from NSE shows.

Interestingly, the huge inflows from retail and domestic institutional investors (DIIs) come at a time when foreign portfolio investors (FPIs) have been doing a see-saw in terms of their activities in the Indian stock market and have been net buyers at Rs 30,604 crore in 2024 till date, according to NSDL data.

Analysts believe that the trend clearly shows that Indian stock markets are no longer heavily dependent on FPIs as was the case a few years back.

They further believe that retail investors and mutual funds will most likely maintain their enthusiasm going ahead as the Indian equity market continues its rally, on the back of a resilient domestic economy.

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Despite global volatility, India's economy remains strong, supported by the Union budget's focus on infrastructure, fiscal prudence, and rural welfare, they say.

Axis Securities, in its latest note, has maintained that the Indian economy is well-positioned for growth and offers stability amid global volatility. They believe in the long-term growth potential driven by favourable structural factors and increasing capex, which is boosting credit growth.

This outlook supports expectations of double-digit returns for Indian equities over the next 2-3 years, driven by double-digit earnings growth. Nifty earnings are projected to grow at 16 percent CAGR from FY23-26, with financials being the primary contributors to earnings for FY25-26, stated the report.

Incidentally, retail and mutual funds, which have driven gains in mid-cap and small-cap stocks, are now turning to large-cap stocks. This comes at a time when a large section of analysts has been recommending investors to stay in the market while maintaining liquidity and investing in high-quality companies with strong earnings visibility over the next 12-18 months.

The benchmarks Sensex and Nifty, along with BSE MidCap and SmallCap, have been hitting fresh record highs at regular intervals despite short-term challenges from the Union Budget and tepid Q1 earnings.

Despite concerns over higher capital gains tax rates, increased STT, and the removal of indexation benefits on LTCG for real estate, continued support from mutual funds and retail investors has maintained market strength, say experts.

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Indian markets reached a milestone on Thursday as Nifty crossed the 25,000 mark and Sensex surpassed 82,000 for the first time. Both the indices rose over 13 percent and 15 percent, respectively, while the broader markets, BSE MidCap and SmallCap, surged over 31 percent and 29 percent in CY24 to date.

Going ahead, analysts suggest the market will watch several key events: next week's RBI policy meeting, the anticipated FED rate cut in September 2024, monsoon progress, US bond yields, oil prices, capital flows, and the US election in November 2024. These factors are likely to keep the Indian equity market volatile, with potential swings in either direction.