SIP inflows for the month of August were at Rs.15,813 crore, well above the Rs.15,000 crore level for the second month, according to the latest mutual fund data released by the Association of Mutual Funds in India (AMFI).

Data shows that investors have continued to retain their disciplined strategy of opting for Systematic Investment Plans even as markets have moved into a higher valuation territory.

Small Cap Funds continued to hold investors’ interest in the month of August. However, Multicap funds, Mid Cap Funds, and Flexi Cap Funds gained substantial flows in the previous month.

“Investors continued to hold their interest in Small cap funds with Rs.4265 crore of inflows, maintaining the run rate above the Rs.4000 crore mark for the third month in a row. Multicap funds with inflows at Rs.3422 crore, Midcap funds at Rs.2512 crore and Flexi cap funds at Rs.2193 crore were the other three categories gaining substantial flows from investors,” said Gopal Kavalireddi, Vice President, Research at FYERS.

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The equity mutual funds’ flows were higher for the fifth consecutive month, registering a 165% rise. Of the Rs 20,245 crore of inflows, thematic funds stood at the top spot with Rs 4806 crore.

Five New Fund Offers from the sectoral fund category collectively garnered Rs. 2556 crore in August. A total of Rs 5002 crore was raised through 7 NFOs in the equity categories, while Rs.2247 crore was raised through one Hybrid category scheme.

The total Assets under Management (AUM) by the end of August stood at Rs.46.63 lakh crore vs. Rs.46.37 lakh crore with equity AUM contribution at Rs.18.4 lakh crore vs. Rs.17.8 lakh crore (MoM).

“Net inflow into mutual funds stood at Rs.14,386 crore, a sharp markdown from the Rs.82,046 crore inflows in July. While the debt category saw net outflows of Rs.25,872 crore, equity mutual funds remained strong at Rs.20,245 crore of net inflows, with Hybrid fund flows of Rs.17,082 crore, maintaining their momentum from last month,” said Kavalireddi.

Over the last six months, the large-cap indices underperformed in comparison to the mid and small-cap indices by a substantial margin.

In August, the benchmark Nifty 50 index was down by 2.53 per cent, while the Nifty Midcap 100 index was up 3.7 per cent, following up on the 5.5 per cent in July, 5.9 per cent in June, and 6.2 per cent in May.

“The excitement seen in mutual fund inflows figures for August 2023 comes as no surprise as Nifty Futures are trading at 20,000 levels. Small caps and midcaps Funds are the flavour of the season,” said Viraj Gandhi, CEO, SAMCO Mutual Fund.

“Mutual fund investors are drawn to performance. Such inflows have been noticed as a result of the midcap 150 and small-cap 250 indices yielding about 8-9% in the previous one month ended 10th September 2023, compared to 2% for the larger index Nifty 50. This was also due to a Rs 350 crore outflow from large cap funds throughout the month,” he added.

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The Nifty Smallcap 100 index rose by 4.6 per cent in August, following up on the strong 8 per cent return in July, 6.6 per cent in June and 5.1 per cent in May.

“Smart investors, noticing the underperformance of the broader markets at the beginning of the calendar year, infused Rs.28,244 crore in the mid and small-cap funds between April – August period. In the same period, large-cap funds witnessed an outflow of Rs.5588 crore,” said Kavalireddi.

The market cap to GDP ratio for India has risen above the 106 per cent mark, venturing into the overvalued territory for the time being.

“Prudent investors can look to take their foot off the pedal from infusing fresh lumpsum funds into the market and continue the SIP mode to counter any market correction or volatility in the near term,” said Kavalireddi.