In July, equity mutual funds (MFs) saw a surge in inflows despite market volatility following the Union Budget. Active MF schemes received an impressive Rs 37,113 crore, marking the second-highest monthly inflows ever, just shy of the record set in June with Rs 40,608 crore pouring in. This continued momentum indicates a strong investor interest in equity MFs, even in the face of market uncertainties.
One notable highlight was the all-time high in Systematic Investment Plan (SIP) contributions, reaching Rs 23,332 crore. This milestone underscores the commitment of retail investors to disciplined investing and long-term wealth building strategies. Venkat Chalasani, CEO of the Association of Mutual Funds in India (Amfi), emphasized the growing importance of mutual funds in retail investors‘ financial planning, enabling them to accumulate wealth systematically over time.
The influx of funds coincided with a wave of new fund offerings (NFOs), particularly in the thematic space. Active equity NFOs collected a substantial Rs 37,668 crore over the past three months, representing a significant portion of total flows from May to July. However, some industry experts have raised concerns about the shift towards riskier sectoral and thematic schemes, noting a change in investor sentiment.
Swarup Mohanty, Vice-Chairman & CEO at Mirae Asset Investment Managers (India), highlighted the shift in investor focus from core to tactical or satellite segments of their portfolios. This shift towards sectoral funds may indicate a change in risk appetite or a short-term pursuit of higher returns, reflecting evolving investor preferences in the current market landscape.
Overall, equity MF inflows in FY25 have already reached two-thirds of the total inflows recorded in the entire FY24, amounting to Rs 1.3 trillion in net inflows. The substantial inflows, coupled with mark-to-market gains, have significantly boosted the assets under management (AUM) of active equity schemes, increasing by Rs 5.4 trillion in the past four months. This growth has propelled the industry’s AUM to nearly Rs 65 trillion, a 6% increase from the previous month.
In addition to equity funds, other categories also saw robust inflows, with debt funds attracting nearly Rs 1.2 trillion, hybrid funds garnering Rs 17,436 crore, and passive schemes securing Rs 14,778 crore. The Nifty 50 index, a key equity benchmark, posted a 4% gain in July, supported by institutional investments. Akhil Chaturvedi, Executive Director & Chief Business Officer at Motilal Oswal AMC, noted a shift from equity to debt investments among some investors due to market volatility and global concerns. However, he emphasized the importance of maintaining equity investments for long-term portfolio diversification and growth.
In conclusion, the strong inflows into equity MFs reflect investor confidence and interest in the market, despite short-term fluctuations. The industry’s growth and resilience in the face of challenges demonstrate the enduring appeal of mutual funds as a wealth-building tool for retail investors.