The Indian retail investors continued to plough funds into mutual funds in September, with a stark shift visible in investor preference amid declining equity market’s appeal and glittering precious metals.
Overall, the mutual fund industry added 40 lakh folios in the month, with the total assets under management (AUM) inching to ₹75.38 lakh crore from ₹75.18 lakh crore earlier, suggests the latest AMFI data released today, October 10. But what stands out is the retail rush in gold and silver ETFs amid the rocketing precious metal prices.
Retail Rush In Gold, Silver ETFs
Retail investors have invested almost ₹8500 crore in the gold ETFs this month, which is over 10% of the overall AUM. This is exactly in parallel with gold having delivered more than 10% returns in a single month and nearly 60% for the year, noted Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital.
The retail rush fuelled total AUM in gold ETFs past the ₹90,000 crore mark.
Apart from gold, silver ETFs, too, attracted significant attention from investors, garnering record ₹5342 crore inflows, highlighting a diversification shift towards metals. This momentum was mirrored in multi-asset allocation funds, which saw nearly ₹5,000 crore inflows, largely driven by gold and silver allocations, said Kartik Jain, MD & CEO, Shriram AMC.
According to Jain, this trend is underpinned by global macro factors.
Anticipated interest rate cuts, stubborn inflation, slowing global growth, fresh investments by central banks in gold and silver, and persistent geopolitical tensions are driving investors towards safe-haven assets. Investors also look to benefit from soaring precious metal prices, ahead of Diwali, amid supply shortages.
Retail interest in precious metals: Is it healthy?
Marquee investor Vikas Khemani of Carnelian Asset Management, however, now sees FOMO among retail investors when it comes to precious metals like gold and silver.
Gupta of OmniScience Capital opined that the majority of retail investors are again demonstrating the recency bias. This behavioural error seems rewarding in the short term and punishes the portfolios in the long run, he warned.
He added that certain popular sectors and themes could be significantly overvalued, and investors would do well to stay away from them as compared to less popular but promising and undervalued themes, where ideally investors should be allocating.
Recently, Kotak Mahindra Asset Management Company temporarily halted fresh lump-sum investments in its silver ETF-of-fund to protect investors amid a short-term supply crunch.
Meanwhile, Jain of Shriram AMC said that the September data underscores the increasing role of precious metals in long-term wealth diversification. For investors, it’s a reminder that balancing traditional equity and debt hybrid strategies along with strategic asset allocation to metals can strengthen portfolios against economic uncertainties, while tapping into avenues for long-term growth, he added.
Sharing an asset allocation strategy, Karthick Jonagadla, Founder and CEO of Quantace Research, advised staying invested with a tilt to diversified equity while keeping measured exposure to mid and small-cap stocks. He told investors to park near-term cash in overnight and ultra-short funds while maintaining a 5-10% gold allocation as ballast.
In the Indian commodity market, gold prices hit a high of ₹123677 on the MCX, while in the international market, the precious metal raced past the $4,000/ounce level. The silver prices had soared to a record high of ₹1,53,388 per kg on the MCX in the last trading session. Comex silver futures touched a record high of $49.96.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
