Equity MFs log record inflows in July buoyed by great show by NFOs

Investors pour Rs 22,583 cr in equity schemes even as markets hit new highs

Equity mutual funds (MFs) logged one of their highest monthly inflows in July buoyed by the success of new fund offers (NFOs) launched to tap into the positive investor sentiment towards the equity market which are hovering around lifetime highs.

Equity-oriented schemes saw net inflows of Rs 22,583 crore, most since at least August 2017 when inflows were Rs 20,362 crore. (Like-to-like data for the earlier period isn’t available since the reporting structure was changed.)

Asset management industry mobilised around Rs 13,709 crore through new offerings last month steered by ICICI Prudential Flexicap NFO, which collected Rs 9,808 crore.

Existing equity funds also continued to attract investor flows despite a sharp up move in the mid- and small-cap stocks even as the large caps ended flat in July. A Balasubramanian, MD and CEO of the Aditya Birla Sun Life AMC said that flows are coming across the categories and stagnation of systematic investment plans (SIPs) is also getting reversed.

“I think alternate investment opportunities today is very less and due to which investors are willing to have higher allocation towards equities. This is one of the primary reasons for continuous inflows into the equity funds,” added Balasubramanian.

In the last five months, equity funds have continued to witness net inflows amounting to Rs 51,207 crore, more than reversing the outflows seen over the previous seven months.

Flexicap category saw inflows of Rs 11,508 crore followed by sectoral funds which witnessed net inflows of Rs 5,728 crore. Value funds and equity linked saving schemes (ELSS) saw net outflows in the equity category.

Arun Kumar, Head of Research, FundsIndia says, “A lot of investors who have accumulated higher savings in the last year due to lower spending and were staying on the sidelines are getting back. The decline of the second wave, strong recent returns from equities, and the stability of the markets despite the second wave have added to investor comfort and confidence.’

With sharp surge in the equity markets performance of the equity schemes has also improved which have led to higher participation from the investors. In the last one year, average large cap funds have given returns of 46.5 per cent, while midcap and smallcap funds have given returns of 71 per cent and 98 per cent respectively.

The investments through SIPs also increased in July compared to June. The SIP contribution in July stood at Rs 9,609 crore as against Rs 9,155 crore in June. The SIP AUM rose to Rs 5.03 trillion. New SIPs registered during July 2021 at 2.37 million is the highest ever registration seen in the industry.

N S Venkatesh, Chief Executive, Amfi said, “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 cue, retail investors too are participating in the equity rally, largely through Mutual Fund SIPs, on a continued rising quantum at record levels.”

Apart from equity funds, hybrid schemes and other schemes (which includes passive and fund of fund investing overseas) saw net inflows of Rs 19,481 crore and Rs 10,084.16 crore respectively. Under hybrid schemes, arbitrage funds witnessed net inflows of Rs 14,924 crore in July.

Even debt-oriented schemes saw net inflows of around Rs 73,694 crore in July. Liquid funds saw highest inflows of Rs 31,740 crore in July followed by money market funds and floater funds. Overall MF industry saw net inflows of Rs 1.14 trillion crore and net assets under management as on July stood at Rs 35.31 trillion.