Hefty DII Inflows a Key Reason for the Rally on Dalal Street

Mutual Funds are seeing massive inflows. The inflows in mutual funds in FY17 at Rs 3.43 trillion were 155% higher as compared to a year ago. Post demonetization, the shift to mutual funds have been noteworthy.

There are a few reasons for this sharp jump. After depositing their monies into banks, as a part of the government’s drive to replace high denomination currency notes, there were limited attractive investment avenues. Returns on bank deposits have hardly been sufficient after considering the effect of inflation.

Even gold and real estate turned out to be unattractive as there has been no clear sign of price improvement in the near future.

HNIs and institutional investors, which predominantly invests in real estate, gold and fixed deposits, have now started investing in mutual funds given the higher returns than most traditional investment avenues. And this trend has sustained in the current fiscal year.

Currently, excess liquidity is driving the markets to new highs. However, earnings growth in the coming quarters would be the key things to watch out for. Sensex is trading at a price to earnings (P/E) multiple of 24 times and has already started to look expensive. If the earnings do not catch up, the p/e multiple could further shoot up leading to a significant correction in the equity markets.

Top Stocks in Action Today

Bhushan Steel rallied by 20% in yesterday’s trade as Arcelor Mittal has shown interest in buying the company.

Bhushan Steel owes nearly Rs 420 billion to various banks. Bankruptcy proceedings had been initiated against Bhushan Steel in July 2017 beneath the Insolvency and Bankruptcy Code (IBC) for non-repayment of loans.

The company has a significant presence in auto steel categories with a 5.6-million tonne integrated steel unit, including a cold rolled facility in Odisha.

Reliance Industries hit a life time high of Rs 943 in yesterday’s trade. The stock has nearly doubled since the beginning of this calendar year. The surge has been mainly on the back of its foray into the telecom space.