Systematic Investment Plans (SIPs) hit a fresh all-time high of Rs.16,042 crore in September 2023. The growth in Net Assets under Management (AUM) was flat, with AUM at Rs.46.58 lakh crore. SIP AUM stood at Rs.8.70 lakh crore, against Rs.8.47 lakh crore in the previous month, according to AMFI’s monthly data.

However, net flows in mutual funds plunged to Rs.66,192 crore for September, owing to Rs.1.01 lakh crore (vs. Rs 25,873 crore in August) outflows from the debt category.

“Advance tax payments and other quarter-ending accounting and financial necessities resulted in an outflow of Rs.90,739 crore from 5 categories – Liquid, Money Market, Ultra Short Duration Overnight and Low Duration funds,” says Gopal Kavalireddi, Vice President – Research at FYERS.

Meanwhile, mutual fund inflows into thematic/sectoral funds continued to remain positive with the highest net inflows in September 2023 while hybrid funds also experienced an uptick in net inflows on a month-on-month basis.

Interestingly, small and mid-cap fund categories witnessed a decline in net inflows in September. (read more details here)

According to experts, the increase in hybrid fund investments could be attributed to investors’ renewed focus on capital protection.

“Hybrid funds experienced an uptick in net inflows on a month-on-month basis. This trend reflects the prevalent risk-off sentiment in the market, with investors seeking to diversify their investments while maintaining a focus on capital protection,” says Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC.

The increased flows into hybrid and sectoral funds were also due to several new fund offers (NFOs) launched in the previous month.

“A total of 16 NFOs were launched in September, with 5 hybrid categories garnering Rs.5,233 crore, followed by 6 equity-oriented schemes with Rs.2503 crore and Rs.59 crore in other schemes,” says Gopal Kavalireddi.

“Hybrid funds have received a net inflow of Rs. 18,650.45, the highest ever in over 2 years mainly due to continuance of rising interest in arbitrage funds since last 3 months,” Viraj Gandhi, CEO, SAMCO MF.

Melvyn Santarita, Analyst – Manager Research, Morningstar Investment Adviser India, says that among the equity asset class, the sectoral/thematic funds saw the highest inflows to the tune of Rs 3,146.8 crores during the month. “The spike in the flows of this category could also be attributed to the fact that there were 4 new fund launches in this category which cumulatively garnered Rs 1,629 crores during the month of September.”

In August 2023 too, the sectoral/thematic category saw the highest flows (Rs 4,805.81 crore aided by 5 new fund launches).

Large Caps expected to gain traction

Gopal Kavalireddi says that the large-cap outflows finally are witnessing a slowing down. “As valuations of mid and small caps have risen across many sectors and stocks, the coming months could see investors opting for large caps, as they are positioned to offer better returns and a larger margin of safety.”

“With increasing uncertainty due to valuations, geopolitical tensions and the commencement of the quarterly earnings season, Investors continue to adhere to the time-tested strategy of SIPs for their investment journey,” he adds.

NS Venkatesh, CEO of AMFI, says the mutual fund Industry’s growth has been on an upward trend. “The half-yearly growth has been encouraging and we are optimistic that the trend will continue to grow. Irrespective of the global headwinds, Indian markets have shown resilience. DII’s have been strongly driving the market growth. The Mutual Fund industry crossing the 4 crore unique investors mark is a testament to Indian retail investors’ participation in equity markets through the Mutual Fund route. This is further demonstrated by the SIP contribution of Rs 16,042.06 crores in September 2023 which is the highest till date and the stellar growth of 21% in overall AUM.”

Disclaimer: Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.