Less investment of domestic funds than foreign funds in companies with administrative complexity

MUMBAI: Corporate scandals in India have made the country's fund managers more vigilant in choosing stocks than foreign fund managers and retail investors.

Domestic fund managers have become more adept at using information about companies and the government and economic environment to avoid falling into the trap of investing, an analyst said.

Based on previous experiences, domestic mutual funds have made more cuts in investing in wasteful companies than foreign companies. Domestic mutual funds have been investing more than foreign funds in mid-caps and small-caps, which have taken the stock market higher since 2015.

The investment of domestic fund houses in companies with administrative complexity is lower than that of foreign funds and retail investors. The report is based on an analysis of shareholdings in Indian companies, such as Cox & Kings, Yes Bank, Diwan Housing Finance and Gitanjali, which have been weakened in the recent past. Companies with low investment of domestic fund houses have outperformed companies with high investment.

Domestic mutual fund Nifty 500 Index stocks have a combined investment of 9 per cent in six companies, while foreign fund houses' exposure was in 15 companies in the index. The selection of domestic fund managers has also been very successful compared to retail investors in India. The Corona epidemic has led to a sharp rise in the number of retail investors.