Large outflows hurt equity MFs in July

This was marked by outflows worth ₹1,880 crore from large cap funds, continuing the trend seen in June that saw outflows of ₹2,049.61 crore, as investors booked profits amid a rally in the stock markets.

However, mid- and small-cap funds remained the favourite of investors. Small-cap funds saw inflows worth ₹4,171.44 crore, while mid-cap fund inflows were at ₹1,623.33 crore. While net inflows in equity schemes declined in July over June, the trend remains healthy if longer term average is considered, said experts.

Sriram BKR, senior investment strategist at Geojit Financial Services said equity funds saw net inflows of ₹7,505 crore in July were up 37% over the three-month average. Gross purchases stayed flat month-on-month and redemptions marginally inched up by 2.5%, he added.

The markets are at a high, and some profit booking is taking place in large cap funds. Some investors redeem the money and then reinvest, said an industry expert. There are fewer investors who switch investment schemes and opt for redemptions. Some money may also be already getting relocated to broader market funds.

The mid and small cap funds are continuing to see inflows and investors with higher risk appetite are investing, said industry leaders. Many of these investors are relatively evolved investors and continue investments, they said.

Inflows in debt schemes rebounded sharply from the outflows in June. A whopping ₹61,218 crore of investments were seen during July, a 146% rise from a year ago.

Viraj Gandhi, chief executive officer at Samco Mutual Fund attributed it to rising bond yields globally and the assumption of a hawkish attitude in the next RBI policy on Thursday.

Short-term debt fund inflows continue due to treasury management by banks and corporates, while hybrid categories like multi-asset allocation funds have seen increased investor interest, said NS Venkatesh, CEO at Amfi.

Arbitrage funds are also seeing a good pick up in flows. At ₹10,074.87 crore, the inflows lifted overall inflows in hybrid schemes.

“While returns have been good, the funds have become attractive after changes in debt fund taxation, The post-tax returns are good in arbitrage funds,” said Anand Vardarajan, business head of banking, institutional clients, alternate products and product strategy at Tata Mutual Fund.

Among other funds, investments in gold ETFs jumped to ₹456.15 crore, from ₹70.32 crore in June.

The healthy trend in systematic investment plans or SIPs continued. SIP contribution stood at an all-time high of ₹15,244.73 crore in July. The SIP asset under management (AUM) stood at ₹8.32 trillion for July, up from ₹7.93 trillion for June.

Venkatesh said that the surge in retail investors’ interest in mutual funds has translated into impressive inflows across scheme categories. “The star performer this month has been systematic investment plan (SIP), with an impressive 33,06,337 new SIP accounts registered and a record monthly contribution,” he said, adding that the industry’s AUM has grown by 25% y-o-y, underscoring the significance of mutual funds in financialization of savings.

Updated: 10 Aug 2023, 12:33 AM IST