Equity mutual funds received staggering Rs20,000 crore in the of month of August. While foreign institutional investors (FIIs) have been pulling out from the Indian stock market, domestic institutional investors (DIIs) have provided strong support to markets. What is driving this growth in mutual funds? Are investors really understanding the risk attached with equities or the growth is driven by herd-mentality.
One reason for the rise in equities is low return given by other asset classes. While fixed deposit have been giving abysmal low return of 6-7%, property market has also been in slump for many years. In such a situation mutual funds have caught the fancy of many people who have been looking for other avenues to earn higher returns. Over the last one year equity diversified and small cap funds have given returns as high as 30 and 40 percent, respectively in last one year.
