MFs enjoy August, soak up record Rs 21,000 crore

Net inflows, after factoring in the redemptions, touch 12-month high of Rs 6,500 cr

Domestic investors are pouring money into equity mutual funds (MFs), amid strong buoyancy in the stock markets.

Last month, equity schemes saw their highest-ever gross inflow at Rs 21,300 crore, while net inflow (after factoring in the redemptions) touched a 12-month high at Rs 6,500 crore.

Gross inflow or sale of equity schemes has averaged Rs 13,600 crore since May 2014, when the tide for the MF sector changed with continuous positive flow. The sharp increase now comes amid a good run in the markets, with the benchmark Sensex and Nifty nearing record levels and the broader BSE Midcap index recording new highs.

Overall equity accounts have crossed 37 million, while assets under management (AUM) in equity rose to another high of Rs 4.67 lakh crore in August.

Sectoral entities have expressed surprise at the sudden jump in inflow. They did not rule out the possibility of a rise from high net worth individuals (HNIs) and higher traction in arbitrage schemes. They, however, maintain that most of the inflow is from retail (small) investors, as the gross number of new Systematic Investment Plan (SIP) registrations have reached 700,000 a month.

Milind Barve, managing director, HDFC MF, says: "Investors are clearly backing India's growth story, which looks sustainable. The flow is largely retail and there is not much of hot money coming in. India is now on a high growth trajectory and investors do not want to miss the bus. I believe the markets will continue to attract local and foreign money."

Adding: "These are strong numbers and are unlikely to be an aberration. The industry is seeing more than half of the inflow through SIPs. This is a good sign for the growth of the sector as a whole."

The number of SIPs has already crossed 10 million, with an average size of Rs 3,400. This means the sector is assured of at least a regular monthly inflow of a sticky Rs 3,400 crore through this route. Any lump-sum investment is over and above.

Dhirendra Kumar, chief executive officer of fund tracking entity Value Research, says: "Investors got tired of waiting for a correction and opted to enter through SIP. It's a very big qualitative shift. The SIP route is now the most preferred, as investors have understood the power of monthly systematic investment and the compounding benefit. Further, this is stable money."

The sector, on an overall basis, had net inflow of Rs 25,332 crore during the month. It was led by income funds. Balanced funds continued with their steady flow and garnered another Rs 2,732 crore in August, while its AUM hit a record Rs 53,881 crore. It's the first time this category crossed Rs 50,000 crore; 65-70 per cent of balanced funds' assets are in equity.

Gold funds, however, continued to have outflows on a net basis, at Rs 51 crore.