Net equity inflows into mutual funds fell 15% month-on-month to Rs 24,697 crore in July with large cap schemes seeing an outflow for the first time since December 2023. Money moved into small cap and mid-cap schemes with both categories attracting net inflows in excess of Rs 5,000 crore for a second month in a row. Inflows into small-cap schemes in particular jumped 39% during the month while mid-cap schemes saw an increase of 2% m-o-m.
Akhil Chaturvedi, Executive Director, Motilal Oswal AMC believes inflows into equity schemes remain range-bound possibly because investors are turning cautious after low returns in the past two years. Nonetheless, Chaturvedi noted that flows into Systematic Investment Plans (SIP) have been steady even as money has shifted to low risk, absolute return products like SIFs and arbitrage funds.
Suranjana Borthankur, Head of distribution, Mirae Asset Investment Managers, said the moderation in equity inflows suggests there is less urgency to buy during dips following the recovery in the markets. “There seems to be a preference for higher beta segments as reflected in the outflows from large cap schemes,” she said.
Aditya Agarwal, co-founder, Wealthy.in attributed the lower appetite for large caps and rising interest in small-caps to investors chasing momentum. “Investors appear to be trimming exposure at the safer, index-heavy end of the market,” he said adding this could be partly due to the correction in IT stocks.
Monthly SIP contributions in July were steady at Rs 31,961 crore and 1.1 million SIPS were added during the month, taking the tally to 99 million. Navneet Munot, MD and CEO, HDFC AMC observed that steady monthly SIP flows, of more than Rs 30,000 crore, are turning household savings into the deepest pool of capital the markets have ever had. Venkat Chalasani, chief executive, AMFI, sees July’s SIP numbers as a reflection of growing confidence in mutual funds as a disciplined investment avenue.
The industry’s net assets rose to Rs 85.76 lakh crore, higher by 4.3% over June. attributed the rise in assets to a combination of mark-to-market gains sustained by the purchases of domestic investors.
Fund raising also saw a spike in July with 25 NFOs garnering Rs 2,022 crore during the month, highest since March. Diversified schemes like multi asset allocation funds and flexi cap schemes, however, saw a reduction in investor interest, marking a 22% and 10% fall in their net monthly inflows in July, respectively.
Among other asset classes, passive schemes saw a 25% decline in their net monthly inflows, primarily due to lower inflows in major sub-categories like domestic equity-oriented index funds, domestic equity-oriented ETFs and commodity ETFs (gold and silver).
Nehal Meshram, senior analyst, Morningstar Investment Research said the moderation in inflows in gold ETFs could be attributed to profit-booking and robust inflows in the first half of the year. She added that despite the decline, continued inflows in the category shows that investor appetite in the category remains intact amidst geopolitical uncertainties.
Net inflows in hybrid schemes also saw a 10% reduction due to lower inflows in multi asset allocation funds and a net outflow in balanced advantage funds and equity saving schemes. Meanwhile, net inflows in arbitrage funds increased by 12% to reach in excess of Rs 6,500 crore.
Debt funds saw net inflows of Rs 1.87 lakh crore during July, led by strong inflows in liquid, overnight and money market schemes. In June, the category had seen net outflows in excess of Rs 1 lakh crore. “Investors continue to value liquidity and flexibility in the debt portfolio, rather than making a broad-based shift towards taking duration risk, “ Varun Gupta, CEO, Groww Mutual Fund said. Saugata Chatterjee, president and deputy CEO, Nippon India Mutual Fund said strong flows into debt schemes indicate that investors are turning to fixed income schemes as serious portfolio anchors.