The online investment platform Rplan.co.uk has seen a 280% increase in flows into Indian only funds in 2015 when compared to 2014, as investors look to capitalise on the strong stock market performance in this market over the past year.
It’s research reveals that there are 294 Indian-focused collective investments (mutual funds, exchange traded funds and investment trusts), but 90% have the two highest risk rankings of 6 and 7 (16% and 74% respectively), which means annualised volatility of 15% – 24.99% or over 25% respectively. Just 23% of the funds available invest in fixed income, with the remainder being pure equity.
The asset management industry has capitalised on the growing investor interest in India by launching 21 Indian collective investments in the past 12 months, and 63 or 21% of the total have been launched since 2013. Just 47% have been around for at least five years.
The Indian stock market grew by around 30% in 2014, and despite returns being negative in 2015, it still outperformed global markets. Some market commentators are predicting a much stronger performance next year fuelled bysteady GDP growth, price falls in commodities such as crude oil, and declining inflation.
Stuart Dyer, Rplan.co.uk’s CIO, said: “The Indian stock market has been outperforming global markets and this explains why we have seen such a big increase in inflows into Indian equity funds. However, our research shows that this is a very volatile asset class and investors should only have a small exposure to it as part of a balanced portfolio.
“I fear that Indian equities are the latest investment fashion item just as China and emerging markets have been. These are high profile, but high risk investments and many retail investors are overly exposed to them.”