What’s behind surge in equity mutual fund inflows in August, will trend continue?

Large-cap funds continued to see net outflows of Rs 348.98 crore in August, less than outflows of Rs 1,880 crore in July.

Why have inflows into equity schemes increased?

Investors have confidence that the country will be able to sustain economic growth over the next 10 to 15 years and, therefore, the conviction of staying invested is also gradually rising, according to A Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC Ltd.

“The economic growth will be much higher. The corporate earnings and profitability will also be better. So, we believe that equity fund flows into various segments such as large-cap, mid-cap or small-cap focussed will see inflows. The positive trend into equity flows will continue to grow,” said N S Venkatesh, CEO, AMFI.

“Sell on market high and purchase on lows was seen in the August higher equity net sales. This was also aided by collections through a few NFOs (new fund offering) in equity and hybrid category,” said Manish Mehta, National Head- Sales, Digital and Marketing, Kotak Mahindra AMC.

Why are small-cap funds seeing continued inflows?

Inflows into small-cap funds remained high at Rs 4,264 crore in August. In the first five months of the current fiscal, retail investors pumped in Rs 19,372.96 crore into small-cap funds.

“It is not an irrational exuberance. It is a calculated sort of investment which retail investors are putting into small-cap funds because of the fact that small-cap have corrected sharply to the extent of 50-60 per cent. Now, investors are seeing value in small caps and so they are investing,” Venkatesh said.

Why did debt mutual fund schemes see outflows?

The net outflows from debt schemes stood at Rs 25,872.5 crore compared with net inflows of Rs 61,440.08 crore in July. This was on account of higher outflows of Rs 26,823.68 crore from liquid funds in the month.

“The negative flows into the liquid fund were anticipated, in the sense that it is a treasury sort of account where corporates transfer money as and when they have a surplus, and take it out when they need money for expenditure. It is not a trend but a normal treasury operation,” AMFI’s Venkatesh explained.

There were outflows from ultra-short-duration funds to the tune of 4,123.23 crore in August.

“In fixed income industry witnessed outflows in liquid and ultra short categories due to institutional investors redeeming investments for business purposes,” said Mehta of Kotak Mahindra AMC.

What about SIP inflows?

The gross monthly systematic investment plan (SIP) contribution reached an all-time high of Rs 15,813.54 crore in August from Rs 15,245 crore in July.

The number of new SIPs registered also hit a record high of 35,91,650 in the month. SIP asset under management (AUM) in August was Rs 8,47,130.87 crore vs. Rs 8,32,274 crore in July.

“The SIP story tells us that retail investors have continued to repose faith and trust in mutual funds. They continue to invest in mutual funds through the SIP route, one of the best routes that retail investors can pursue,” Venkatesh said. During the month, the number of SIPs discontinued or matured was also at an all-time high of 19,58,530.