August equity MF inflows cross ₹20K cr to hit 5-month high

The strong traction in equity funds was led by mid-cap and small-cap funds which continued to attract investor interest during August even though large cap funds saw continued outflows amidst profit booking.

“In the month of August, the equity markets exhibited a risk-on sentiment, which is also reflected in the mutual fund flow. Small caps funds extended the positive trend into the current month with the highest net inflows, followed by thematic/sectoral funds and multicap funds,” said Akhil Chaturvedi, chief business officer, Motilal Oswal AMC.

Inflows in the small cap funds maintained a run rate of more than ₹4,000 crore for the third month in a row. At ₹4,264.82 crore in August, small cap fund inflows came slightly higher than ₹4,171.44 crore seen during July. Mid-cap funds too saw healthy inflows at ₹2,512.34 crore, increasing from ₹1,623.33 crore in July. The ongoing robust rally in mid- and small-cap stocks has been supporting investor interest and flows towards these funds, said analysts.

Meanwhile, large cap funds continued to see outflows, at ₹348.98 crore in August. However, the pace of outflows declined when compared to July which had seen outflows worth ₹1,880 crore amidst profit booking. Thematic and sectoral funds saw inflows worth ₹4,805.81 crore which more than trebled over the previous month. Multicap funds also saw an almost 37% rise in inflows over July.

“Clients are increasingly favouring the multicap route, signalling a shift in market dynamics. We have witnessed encouraging flows across various categories like large and midcap, flexicap, midcap, and smallcap. Arbitrage category is also attracting strong inflows due to its tax efficiency,” said Anand Vardarajan, business head, institutional clients, banking, alternate investments and product strategy, Tata Asset Management.

That apart, new fund offers (NFOs) of ₹7,531 crore also supported overall equity inflows in August, said analysts. A total of 15 schemes were launched in August, including 14 open-ended and one close-ended scheme.

“Sell on market high and purchase on lows was seen in this August’s higher equity net sales. This was also aided by collections through few NFOs in equity and hybrid category,” said Manish Mehta, national head, sales, marketing and digital business, Kotak Mahindra Asset Management Co. Ltd.

Debt funds, however, saw net outflows of ₹27,388.42 crore during the month, led by outflows from liquid funds and very short duration funds.

Fund flows in this segment remain influenced by corporates that park extra funds and withdraw at the time of need, said analysts.

Meanwhile, the contribution of systematic investment plans (SIPs) stood at an all-time high of ₹15,813.54 crore in August. SIP asset under management (AUM) stood at ₹8.47 trillion in August 2023, compared to ₹ 8.32 trillion in July.

“It is very heartening to see that Indian retail investors continue to invest in the equity markets via the mutual fund route, especially through SIP mode. The record SIP contribution of ₹15,813.54 crore is a testimony of the Indian investors’ long-term approach to building wealth by investing through small ticket sized SIPs,” said NS Venkatesh, chief executive officer, AMFI.

Overall, the mutual fund industry’s net AUM stood at ₹ 46.63 trillion, while average AUM was at ₹46.93 trillion in August. The retail AUM (equity, hybrid and solution-oriented schemes) stood at ₹24.63 trillion in August, with an average AUM of ₹24.38 trillion. The number of SIP accounts stood at the highest ever, at 69.6 million in August, as against 68 million in July.

Mukesh Kochar, national head, wealth management at AUM Capital said that the flow from SIP is consistent and at the same time, family offices and HNIs are also increasing equity allocation, given the performance and fear of missing out.

On the mid-cap and small-cap space, Kochar said that one needs to be a little cautious. The flow of money is going to chase stocks and that might create some overvaluations in certain pockets, particularly in small-cap space, he said, adding that at the same time, large caps have not run up much and investors should rebalance their portfolios.

Updated: 12 Sep 2023, 12:28 AM IST