What is the one of the most important thing in any business?
Supply and Demand
So to get a better understanding of the current Indian stock market let’s understand the fund flows.
Market Cap = 130 lakh crores.
Approximate holding pattern -:
Promoters – 48%
FII – 22%
Mutual Funds – 6%
Insurance companies – 3%
Retail Investors – 21%
FII is the reason why global scenarios,currency prices,valuations and growth of other markets become so important in stock markets.
1) New IPO’s 1) Mutual fund
2) FII’s. 2) Retail
Insurance companies and promoters are almost neutral .
Almost same hence the tug of war.
Everyone is waiting for a correction to invest so imagine how much support the market provides.
3 engines of a bull market-:
2) Mutual funds
When this happens the retail blindly follows.
We are nowhere close to this yet.
Getting into details-:
Equity Mutual Funds:
Market Cap – 6.5 lakh crores
Monthly inflow – 20000 crores
Monthly SIP – 5500 crores
(SIP’s are usually sticky and remain for long term)
I expect this will increase as peoples awareness about mutual funds will increase.Also the returns on other investment asset classes are pretty low compared to equity.
Recently EPFO limit for equity has been increased from 15% – 25% which is approximately 3000 crores more monthly cashflow in markets.