Domestic equity mutual funds received inflows of $3.9 bn, the highest ever in any month. Including ETFs, inflows stood at $4.1 bn. In the month of August, equity flows were positive for the 17th straight month. Year-to-date, domestic mutual funds have received equity inflows of $18.6 bn. By the end of the month, equity mutual fund AUM stood at $111 bn, and as a percentage of market cap rose to 5.3%, its highest level since July 2000. Similarly, equity ETF assets rose to new highs of $8.4 bn. Year-to-date, ETF inflows stood at $2.6 bn (Rs 169 bn). Flows in fixed income funds were Rs 356bn. On a year-to-date basis, flows in fixed income flows are similar to equity flows at $19 bn. At August end, fixed income AUM rose to $211 bn. The total AUM for MF industry stood at $322 bn – a record level.
The trends in the two other sources that are driving the domestic flow surge are as follows: NPS’ pension assets stood at $30bn at the end of July. We estimate their equity assets to be at $3.5 bn. Secondly, EPFO has raised its equity allocation to 15% in FY18 from 10% in FY17. As per our estimate EPFO could likely invest Rs 250-300 bn in equities in FY18, of which Rs 57 bn has been invested thus far. We remain of the view that India is in the midst of a domestic
liquidity supercycle.
