Formula E cars race. Photographer: Brent Lewin/Bloomberg

Mutual Funds For First Time Manage More Money In Stocks Than Insurers 

Mutual funds for the first time manage more money in equities than insurers as the last stock rout erased the gap that started narrowing after demonetisation.

Equity assets managed by insurance companies—largely through equity-linked plans or ulips—plunged by nearly Rs 1.22 lakh crore in September and October to Rs 9.22 lakh crore, according to data released by NSDL. That compares with a Rs 86,800 crore decline to Rs 9.32 lakh crore for fund houses.

The steep fall in the value of assets tracked the benchmark Nifty which tumbled nearly 11 percent in the two months as fuel prices rose and the rupee to record lows. Defaults by the Infrastructure Leasing & Financial Services Ltd. and its subsidiaries roiled financial markets further.

Still, the difference between the value of equities managed by insurers and mutual funds started reducing after Prime Minister Narendra Modi outlawed 86 percent of currency in circulation in November 2016 to crack down on unaccounted wealth. That funnelled more money into the stock markets through mutual funds.

The share of mutual funds in India’s total equity assets jumped 400 basis points to 15.5 percent since October 2016, according to the NSDL data. Insurance companies share fell 230 basis points to 15.3 percent during the period. (100 basis points = one percentage point).

The decline in assets under management in September and October came despite domestic institutions, largely mutual funds and insurance companies, net buying stocks worth Rs 38,538 crore.

October was particularly bad for insurers. While the value of stocks held by mutual funds fell just Rs 29 crore, equity assets owned by insurance companies plunged by about Rs 40,000 crore. That suggests insurers selling stocks during the month.