The year 2018 will see continuation of structural shift of investors from physical assets such as property and gold to financial assets, leading to increased liquidity in the financial markets during the year. At an industry event recently, mutual fund experts highlighted the shift in preference of investors towards financial assets as against physical assets.

The trend is likely to continue in 2018 as the share of retail investors in overall equity holding is still at a remarkably low level. According to Saurabh Nanavati, MD and CEO, Invesco Mutual Fund , "This share has doubled to 4-5 per cent in the last couple of years, but we still have a long way to go. Due to increased investment by domestic investors, markets are not seeing correction despite selling by foreign institutional investors (FIIs) over the last year."

Experts noted that the Indian economy is taking a ‘U’ turn on upside and the future looks promising. "At such turning points, earnings is a lagging indicator. Price-to-Earnings (PE) goes up first and then earnings follow. And when actual earnings come, markets tend to correct or consolidate. Markets tend to discount the future and frontload lot of expected returns and this is what is happening in Indian equity market," said Keyur Mehta, Chairman & CIO, Mehta Fincon Services Ltd.

Echoing similar views S Krishnakumar, CIO, Sundaram Mutual Fund, added that the broad-based earnings recovery is expected in fiscal 2019 and fiscal 2020. "We will see normalisation of valuations and believe that domestic sectors like auto, FMCG, infrastructure is likely to do better compared to global sectors like pharma, IT and metals."

Union Commerce Minister Suresh Prabhu in his video message to Mehta Fincon Global Investor Conference, one of India’s largest conferences for HNIs and ultra-HNIs held in Surat, Gujarat, stated that India would be one of the largest contributors to global GDP growth in the next decade and it was important that Indians were getting benefited from that move. "For investors to benefit, they have to understand where the wind is blowing, identify emerging sectors and not wait for tomorrow to invest in the growth story," Prabhu said.

Mutual Funds played a major role in attracting retail investors to the financial markets. Krunal Mehta, MD & CEO, Mehta Fincon Services Ltd, said, “Within financial assets, money is moving to Portfolio Management Services (PMS) and Mutual Funds (MFs). This change post demonetisation is primarily reflected in the growth of mutual fund industry, which has seen inflows rising to Rs 23 lakh crore now from Rs 16 lakh crore in 2016."

Mid-Cap fund launch

Launching a Mid-Cap fund from the Mahindra AMC stable, Ashutosh Bishnoi, MD & CEO , stated that the outcome of the upcoming Assembly elections and the Lok Sabha elections in 2019 will decide the extension of the policy measures. However, according to Bishnoi, the consumption growth story in the country will continue to drive the economy irrespective of the election outcome.

"IT is therefore required, we consider the midcap companies, which command premium in consumer product segment, have market leadership and show faster growth. In a relatively sluggish macro growth environment, midcap companies have shown higher earnings growth compared to large caps," he said during the launch of New Fund offer of 'Mahindra Unnati Emerging Business Yojana' midcap fund in Ahmedabad on Thursday.

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