Money Flow Analysis is the key to success in the stock market. As an investor or trader, it is important to keep track of equity, futures, and options in derivatives & Money Flow Analysis is also important for the mutual funds. In Money Flow Analysis It is important to know the change in no of folios and also the Rate of Change of Net inflows/outflows. This analysis will help you to keep track of the money. Recently, many retail investors were bullish on small cap and mid cap stocks including mutual funds. However, no. of mutual fund folios are decreasing and also the rate of growth is slowing down. It indicates a lack of interest from the investors and traders towards small cap and large cap stocks.
Money Flow Analysis also suggests that small or retail investors are bullish large cap funds and stocks. The rate of change does not match with the no of mutual fund folios. Also, the growth has slowed down. To sustain the up move of the market, the fund inflow should be positive else the market may go down.
With the help of Money Flow Analysis, you can also find out the future interest rate cycle. If the interest rates are expected to go down then the long duration mutual funds deliver spectacular returns. On the contrary, short duration mutual funds perform well if the interest rate increase. Currently, the money is flowing in short or low duration funds indicating bottoming out of interest rates.
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