SIP inflows top Rs 15,000 crore, help offset redemption pressure

Smallcap schemes continue to be a big draw

Mutual funds recorded Rs 7,600 crore net inflows into active equity schemes in July even as redemptions surged to a 30-month high of Rs 30,400 crore owing to profit booking, reveals data from the Association of Mutual Funds in India (Amfi). 

Equity net inflows were 13 per cent lower compared to preceding month’s tally. 

The inflows were supported by strong flow from retail investors through the systematic investment plan (SIP) route.

SIP inflows, which has risen consistently since early 2021, crossed the Rs 15,000 crore mark for the first time.

"The surge in retail investors' interest in mutual funds has translated into impressive inflows across scheme categories. The star performer this month has been SIPs," said NS Venkatesh, CEO, AMFI, an industry body.  

The record SIP inflows came on the back of the highest ever monthly SIP registration of 3.3 million, taking the total active SIP accounts to 68 million. 

Small-cap funds were once again the biggest draw for investors, raking in Rs 4,170 crore even as some fund houses placed restrictions on lump sum investments in their small-cap schemes.

Last month, the Nifty small-cap 100 had jumped nearly 10 per cent. 

The two largest active equity fund categories — large-cap and flexi-cap — recorded net outflows for the third consecutive month.

Investors have been booking profits for the last three months with monthly redemptions staying above Rs 27,000 crore since May, around 50 per cent higher than the outflows seen in previous three months.

Investors have been pulling out money from equity schemes to cash in on the strong rally in the equity market since March.

The benchmark Nifty50 has logged gains in each of the past five months starting March and has risen almost 14 per cent during the period.

"Equity market being at all-time high levels has led to profit booking by investors," said Manish Mehta, National Head - Sales, Marketing & Digital Business, Kotak Mahindra AMC.

The subdued net inflows into equity schemes has led to lower deployment by MFs into the equity market in this financial year.

They have invested just Rs 10,700 crore in the first four months compared to around Rs 70,000 crore in the preceding four months, shows data from the Securities and Exchange Board of India (Sebi).

Debt funds received a net of Rs 61,400 crore, boosted by Rs 52,000 crore inflow into liquid funds.

Other shorter horizon funds like ultra-short duration, low duration and money market also reported higher investments even as inflows remained elusive for most medium-to-longer horizon funds.

Hybrid schemes too reported a sharp jump in inflows with arbitrage schemes alone drawing in over Rs 10,000 crore net inflows.

Multi-asset allocation funds, which is emerging as the flavour of the season owing to back-to-back launches, recorded over Rs 1,300 crore net inflows. 

The jump in inflows across most categories and mark-to-market gains led to a 4.5 per cent rise in industry's assets under management (AUM) to Rs 46.4 trillion.

The AUM surged 18 per cent in the current financial year.