Equity mutual funds received a staggering Rs 20,000 crore in net investor flows in August, while the overall assets under management (AUM) topped the Rs 20-lakh crore mark. These are highest-ever monthly equity flows and AUM recorded by the domestic asset management industry.
The record flows cemented the belief that the industry is going through a structural uptrend due to improvement in financial savings and dimming appeal of traditional asset classes such as gold and real estate.
The market went through a volatile period in August with several bouts of correction, prompting investors to increase allocation to equities amid decline in stock prices.
Diversified equity funds got net flows of Rs 19,515 crore, while tax-saving equity schemes netted another Rs 847 crore. The industry AUM increased to Rs 20.6 lakh crore from Rs 19.96 lakh crore in July.
The higher flows helped money managers deploy more capital in the markets. Last month, the net buying by mutual funds was around Rs 16,000 crore, even as the foreign institutional investors (FIIs) took out more than Rs 10,000 crore.
"The Indian investor has been underweight equities. The falling interest rates on bank deposits have been helping the surge in flows to mutual funds. Recent cuts by banks have been a big trigger. I expect more and more money will flow into equity funds going forward," said A Balasubramanian, CEO, Aditya Birla Sun Life Mutual Fund.
With the latest inflows, the overall equity AUM has comfortably surpassed the Rs 7-lakh crore mark. This excludes assets under exchange traded funds (ETFs), which too are fast gaining popularity.
Currently, there are over 15 million systematic investment plans (SIPs) registered - mostly equity oriented. And the monthly SIP inflows stand at Rs 5,000 crore.
"More and more investors are finding no alternative but equity mutual funds. With latest cuts in bank deposits, investor, which so far was happy with banks' return, is not minding taking a little bit of risk and coming to stock markets through equity schemes. It's a great sign that domestic investors are investing in country's capital market riding mutual fund schemes. It has not been possible without collective measures taken by the all the stakeholders of the sector from AMCs to every single mutual fund distributor," said Sundeep Sikka, CEO, Reliance Nippon Mutual Fund.
Sikka also indicated that chances of smart money coming in during corrections from high networth individuals (HNIs) and large investors can't be ruled out. "Money has been flowing in from across the country and there is no differentiation left between big cities and small towns when it comes to fund flows," adds Sikka.
Meanwhile, inflows in balanced funds, which generally allocate 65 per cent to equities and rest in debt, was at about Rs 8,800 crore.
All categories of funds, except gold funds, witnessed positive inflows. Total net inflows in August across all categories stood at Rs 61,700 crore. Equity funds and liquid & money market schemes contributed over two-third of the flows. So far in the current financial year, the total inflows stand at a massive Rs 2.2 lakh crore in mutual funds.