New SIP figure hits record high, small caps shine: AMFI

• Follow

August was a heartening month for mutual funds, with balanced advantage and small cap funds registering healthy inflows, noted AMFIs monthly data release. The number of new SIPs registered last month also touched a record high at 35,91,650, bolstering SIP contribution for August 2023 to Rs 15,813.54 crores. On the flipside, large cap funds continue to bleed money, seeing outflows of Rs 348.98 crores. 

Overall, the industry looked in solid shape, with the net AUM of the Indian mutual fund industry touching Rs 46,63,480 crores. Even the number of MF folios reached an all-time high of 15.42 crore. 

Equities take lead 

Says Melvyn Santarita, Analyst – Manager Research, Morningstar India, “This was the fourth consecutive month where the large cap witnessed net outflows. Active large cap funds have been finding it increasingly difficult to beat passive funds and therefore some investors could be choosing to exit active funds in this category and choosing the passive route”. 

Both mid and small cap categories continued to witness robust growth, despite prevalent concerns around their valuations. While small-cap funds garnered Rs 4,264.82 crores last month, mid cap funds saw inflows worth Rs 2,512 crores. Even multi-cap funds saw funds to the tune of Rs 3,422 crores in August. Hybrid balanced advantage funds raked in Rs 3,616.01 crores during the same period. 

Santarita continues, “Both the midcap and the small cap indexes have seen a sharp rally over the last 6 months and 1 year. Consequently, investors have also flocked to this category with ever increasing flows. Investors should note that while both the midcap and the small cap categories have the potential to deliver good returns, these categories inherently are volatile with sharp drawdown risks”. 

“Therefore, investors should have a long-term time horizon while investing in these categories. Opting to invest in these categories via the SIP route is a good way by which investors can ride the volatility whilst dollar cost averaging over long periods”, she further highlighted. 

Laggard debt 

It was a dull month for debt, which saw outflows of Rs 25,872.5 crores. Nine out 16 debt categories saw net outflows this month, which can be attributed to the current interest rate scenario and uncertainty over the direction of interest rates in the country. Additionally, the encouraging rally in equities may have pushed investors to change focus from debt to equity.