Equity MFs witness positive inflows for fifth straight month

At Rs 35.31 lakh crore, the Indian mutual fund industry’s net asset under management (AUM) surpassed the Rs 35 lakh crore threshold for the first time. Folios under retail schemes have also reached an all-time high of 8.72 crores, with an additional 55 lakh folios added since April 2021.

Only 18 lakh retail folios were added during the previous fiscal year, from April 2020 to March 2021. That said, the monthly systematic investment plan (SIP) contribution reached an all-time high of Rs 9,608.86 crores.

“RBI’s accommodative stance, healthier earnings growth, vaccination-driven steady containment of Covid pandemic and global and domestic liquidity is driving the Equity markets to historic highs. Taking the cue, Retail Investors too are participating in the equity rally, largely through Mutual Fund SIPs, on a continued rising quantum at record levels,” said N S Venkatesh, Chief Executive, AMFI.

Rise of equity funds

The trend of positive inflows into equity mutual funds has continued for the fifth consecutive month. The Amfi data shows that the equity-oriented mutual fund schemes witnessed a net inflow of Rs 22,583.52 crores in July 2021. Most flows came into the flexi-cap funds, with the category seeing flows to the tune of Rs 11,508.24 crores. Also, the thematic funds witnessed inflows to the tune of Rs 5,728.54.

“We have seen a steady increase in the SIP flows; a significant portion of the inflows are attributable to the NFO’s that were launched over the past month. An improving investor sentiment, driven by a surge in the markets and a positive investor response towards NFO’s have contributed to the inflows over this period,” said Kavitha Krishnan, Senior Analyst – Manager Research Morningstar India.

When it comes to hybrid funds, the net inflow witnessed was at Rs 19,481.07 on the back of balanced advantaged fund, arbitrage fund and equity hybrid fund. “It is heartening to know that after a long hiatus, we have witnessed over Rs 3,000 crore net positive flows in balanced advantage and equity hybrid funds which is the right category to allocate to at this juncture in the markets from a risk-averse investors perspective,” said Aashish Somaiyaa, Chief Executive Officer – White Oak Capital.

The financial experts remain cautious in the coming months. “Markets are choosing to ignore the risks associated with investing in smaller companies, but this could reverse quickly if global liquidity dries up or we face a Covid-19 third wave. We would like to reiterate our stance to tread with caution in the midcap & small-cap space,” said Sorbh Gupta- Fund Manager- Equity, Quantum Mutual Fund. Retail investors should stagger their investments and diversify their equity allocation.