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After a long winter of neglect by investors, equity mutual funds finally seem to be back in the driver’s seat. While it was a puzzle why investors were losing interest when markets were moving up, one explanation was that investors may have decided to take money off the table and manage it themselves. But that seems to have changed, and in May, net inflows into equity funds were Rs 9,236 crore, the highest since March 2020.
So what has really changed in the past few months, to make them come back into equity mutual funds? In With large inflows in May, equity mutual funds are back in favour, we write: “While retail trading has sky-rocketed in recent times, a very small number of active traders earn more money than a bank fixed deposit over a longer period. Perhaps, many investors would have realised that money making isn’t as easy as it seems and are now exhibiting rational behaviour after bouts of irrational exuberance. It could also be the TINA (there is no other alternative) factor. Reinvesting redemption proceeds could be very challenging in a low-rate environment, making investors stick to equities.”
But there is that question of what are equity markets so exuberant about. In today’s chart of the day on output losses of different economies in FY22, the World Bank projects India’s output loss compared to the pre-pandemic level to be 9.3 percent even by the end of FY22. It’s faring worse than its neighbours such as Sri Lanka, Pakistan and Bangladesh.
One challenge is how soon India can vaccinate enough of its population to attain herd immunity and what is required for it to achieve its target. Even the finance ministry has, in its monthly review, called for an accelerated vaccination programme, proposing a sharp increase in the daily vaccination number so that India can attain herd immunity in a shorter period. That can ensure we don’t suffer yet another wave of the pandemic that will result in deaths and lockdowns that hurt the economy and more importantly, small businesses the most.
That small businesses are important for the economy is no secret. But if you needed some convincing, look at our piece on bank credit which asks, whether risk aversion is the only reason holding back bank credit growth? While risk aversion may have been one reason, it is also a fact that big companies have been deleveraging and also switching to bonds to raise funds. Even the 6 percent bank credit growth that is visible now is chiefly owing to retail loan growth and lending to MSMEs. If they have somehow managed to survive two waves of lockdowns, one more wave may prove to be too much for them to bear. Put differently, we have no alternative but to accelerate vaccinations, using all means—private or public—at our disposal.
Here are today’s investing insights from our research team:
Petronet LNG – A slow and steady stock for the long term
Burger King India: Does it have the ingredients to enrich your portfolio?
Improving balance sheet, earnings visibility should cheer Va Tech Wabag investors
Minda Corp: Why this auto ancillary firm continues to remain a favourite
Is there any more upside in Shriram Transport?
What else are we reading today?
Chart of the Day: This year’s MSPs have been fixed with one eye on inflation
The slip is showing: COVID only deepened GST fault lines
ICICI Pru Life's growth outlook brightens on new partnerships and product mix
Videocon insolvency | This is one IBC resolution not worth celebrating
China’s environmental goals fire up metal prices (republished from the FT)
Technical picks: InterGlobe Aviation, DLF, Cipla and Teamlease (These are published every trading day before markets open and can be read on the app)
Ravi Ananthanarayanan
Moneycontrol Pro
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