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Domestic Investors Shift Funds from Stocks to Gold, Silver
27 Feb
Summary
- February saw the lowest domestic institutional stock inflows since April 2025.
- Investors are shifting to precious metals due to lacklustre equity returns.
- Gold and silver funds exceeded equity funds in monthly flows for the first time.
Domestic institutional investors, including mutual funds and insurers, significantly reduced their equity investments in February, marking the lowest inflow since April 2025. This slowdown is attributed to approximately 18 months of tepid returns from Indian stock markets and a notable shift in investor preference towards precious metals.
Mutual fund investors increased allocations to gold and silver in January, driven by significant price surges. This led to monthly flows into precious metals schemes exceeding those into equity funds for the first time. Factors like increased market volatility, particularly in mid- and small-cap stocks, and underperformance in these segments have contributed to the reduced intensity of domestic inflows into equities.
Foreign investors, however, turned net buyers in February, reversing a trend of consistent selling observed since October 2024. While foreign outflows appear to be subsiding, analysts note that other emerging markets offer higher growth prospects, potentially delaying aggressive foreign investment in India.
