Net inflows into equity-oriented mutual fund (MF) schemes dropped 31 per cent month-on-month to Rs 6,120 crore in August, according to the monthly data released by the Association of Mutual Funds in India (AMFI).
The reading was the lowest since October 2021 and only a third of the average monthly inflows received during the first eight months of 2022. From the peak of Rs 28,463 crore in March, inflows into equity MFs have moderated amid a surge in volatility triggered by hawkish pivots of global central banks.
Industry players said concerns around lofty valuations and profit-taking following a sharp rebound from the June lows could have weighed on inflows.
“Equity MF inflows, while positive, have moderated in recent months. There is usually a psychological tendency amongst domestic investors to book profits near all-time highs, which is also getting reflected in the lower quantum of inflows,” said Arun Kumar, head of research, FundsIndia.
India’s benchmark indices jumped as much as 17 per cent from their 13-month lows in June, pushing valuations into expensive territory compared to historical levels.
Within the equity category, sectoral or thematic funds saw the biggest outflow at Rs 1,267 crore, while the ‘large & mid cap fund’ segment saw the highest net inflows of Rs 1,031 crore.
The moderation in equity flows is despite sustained inflows through the systematic investment plan (SIP) route and slew of net fund offers (NFOs). Inflows through the SIP route stood at Rs 12,693 crore in August compared to Rs 12,139 crore in July. Meanwhile, five NFOs in the equity segment helped net Rs 3,062 crore.
Total net inflows into ETFs and index funds were a healthy Rs 15,069 crore. Hybrid schemes, which invest in a mix of debt and equity, saw net outflows of Rs 6,602 crore. However, this was largely on account of Rs 8,548-crore outflows from the arbitrage fund category.
Debt-oriented schemes received net flows of Rs 49,164 crore compared to just Rs 4,930 crore in July. The liquid funds category saw the highest net inflow of Rs 50,095 crores, followed by ultra-short duration funds at Rs 6,372 crore and money market funds at Rs 5,929 crore.
“Monthly SIP contribution, SIP AUM, SIP folios, overall mutual fund folios and AUMs, all at an all-time high coupled with continued positive flows in most categories of mutual fund schemes, signify rising and informed investment preference towards mutual fund asset class,” said N S Venkatesh, chief executive officer, AMFI, a MF industry body.