After an exceptional July, when inflows into equity funds soared to Rs 42,702 crore – the highest this calendar year – in August, flows were more subdued at Rs 33,430 crore – a drop of 22%, according to data from Association of Mutual Funds in India (Amfi).
Retail investors continued to tap the equity market through systematic investment plans (SIPs) in the month of August, with investments flat at Rs 28,265 crore. Overall, the industry’s assets under management (AUM) declined marginally to Rs 75.18 lakh crore, from Rs 75.35 lakh crore in July.
Equity Trends and Investor Behaviour
It also seems that investors turned more cautious. While large-cap and mid-cap saw net inflows rising by 33% and 2.95%, respectively whereas small-cap and thematic schemes saw sharp falls at 23% and 59%, respectively.
New fund offers (NFOs), which had collected a whopping Rs 30,416 crore (30 schemes) in July, saw meagre collections of Rs 2,859 crore (23 schemes).
Said Venkat N Chalasani, Chief Executive, AMFI, “These steady flows across equity, hybrid, passive funds and SIPs underscore the continued confidence of investors in mutual funds as a long-term wealth creation avenue.”
Industry experts believe that despite a tough month, the good news is that most investors continued with their SIPs. In August, benchmark indices fell over 1.5% while the broader market (mid and small cap) was down up to 3.7%.
Jatinder Pal Singh, CEO, ITI Mutual Fund, “… Large-cap funds grew 33% to Rs 2,834.88 crore and mid-caps edged up 2.8% at Rs 5,330.62 crore. ELSS funds turned positive with Rs 59.15 crore inflows. These trends show steady investor confidence, backed by India’s solid economy and growth outlook.”
The number of mutual fund folios rose to 248.9 million, against 245.7 million in July – an increase of 3.2 million folios.
Akhil Chaturvedi, executive director and chief business officer, Motilal Oswal Asset Management Company said that besides NFOs, the rest of the momentum is steady and healthy. “Given past trends, I was hoping for a higher SIP number which is now flat around. Broadly, Indian investors continue to add equities to their allocation despite global headwinds and FII selling, and this is very positive for the markets,” he added.
Debt and Gold Funds See Diverging Flows
Debt funds saw a reversal in trend, with outflows of Rs 7,980 crore as against inflows of Rs 1.06 lakh crore in July. The decline was largely driven by liquid funds, which witnessed heavy redemptions of Rs 13,350 crore from companies.
Both overnight funds and money market funds saw net inflows of Rs 4,951 crore and Rs 2,211 crore, respectively. In July, money market funds had received a record 44, 574 crore – the highest among debt fund categories, as returns from these schemes were better than liquid funds.
Gold exchange-traded funds continued to attract funds, on the back of rising prices. Hemen Bhatia, ED and CEO of Angel One Asset Management Company said, “In August, Gold ETFs witnessed strong inflows of Rs 2,189.51 crore, supported by soaring gold prices and sustained central bank buying. These inflows, reflect growing investor preference for gold as a portfolio diversifier. With its low correlation to other asset classes, gold continues to enhance stability and risk-adjusted returns for long-term investors.”