Equity MF inflows down 15% in July despite record smallcap inflows

Smallcap funds attracted a record ₹7,768 crore and midcap inflows rose to ₹6,192 crore, while higher redemptions pulled overall equity inflows lower

Net inflows into equity mutual fund (MF) schemes declined 15 per cent month-on-month (MoM) to ₹24,697 crore in July, even as combined inflows into smallcap and midcap funds continued to rise.

 

Net inflows into smallcap funds surged 39 per cent MoM to a record high of ₹7,768 crore, while midcap fund inflows rose marginally to ₹6,192 crore. All other categories, except multicap funds, witnessed a decline in net inflows. Largecap funds recorded a net outflow of ₹1,322 crore.

 

“Money is following performance. Markets bottomed out in March, and since then mid and small caps have led the recovery , comfortably outperforming the broader market, while large caps have lagged and dragged the index down. Flows have simply followed that pattern,” said Santosh Joseph, chief executive officer of Germinate Investor Services.

 

 

Flexicap funds garnered the third-highest net inflows at ₹4,709 crore. The category, which has been collecting large sums consistently over the past two years, crossed ₹6 trillion in assets under management (AUM) for the first time last month.

 

Overall, the decline in net investments was a result of a sharp rise in redemptions. Compared with June, gross inflows were up 3 per cent in July, while redemptions surged 16 per cent, data released by the Association of Mutual Funds in India (Amfi) showed.

 

Gross systematic investment plan (SIP) inflows rose marginally to ₹31,961 crore.

 

Indian equities had a volatile but positive July, with the Nifty and Sensex gaining around 2 per cent during the month. The market was supported by strong domestic corporate earnings, easing oil prices and renewed foreign investor buying.

 

Debt-oriented schemes saw a turnaround in July. After a steep net outflow of ₹1 trillion in June, debt funds garnered a net inflow of ₹1.87 trillion in July. The reversal was led by liquid funds and overnight funds, which had seen heavy redemptions in June.

 

Liquid and overnight funds routinely see heavy redemptions at the end of a quarter as institutions withdraw money to meet advance-tax payments and quarter-end balance-sheet requirements. The flows typically reverse in the following month.

 

Demand remained weak across the rest of the debt fund categories.

 

Overall, positive inflows across categories, along with mark-to-market gains, took the industry’s AUM to a new high of ₹85.6 trillion.