Equity mutual funds attract more than ₹38 thousand crore in Aug; SIP hits fresh high at ₹23,547 crore

Equity mutual funds continued their steady growth in August, attracting ₹38,239 crore, fuelled by strong contributions from thematic funds, which were primarily owing to New Fund Offerings (NFOs).

This was around 3.3 per cent higher than the net inflows of ₹37,113 crore logged in July. Interestingly, the quantum of net inflows witnessed in August was the second highest flow ever received in a month. Also, this was second only to the net inflows of ₹40,608 crore received in June.

The latest flow also marks the 42nd consecutive month of net inflows in equity funds, data with the Association of Mutual Funds in India (AMFI) showed on Tuesday.

Moreover, monthly contributions from the Systematic Investment Plan (SIP) rose to an all-time high of ₹23,547 in August as against ₹23,332 crore in the preceding month. This highlights the shifting investor sentiment towards disciplined and long-term wealth accumulation, Venkat Chalasani, Chief Executive, AMFI, said.

Madhu Nair, Chief Executive Officer at Union Mutual Fund, said that equity flows for the month of August 2024 have been a mix of SIP flows, NFOs and existing schemes.

"Net flows continue to remain encouraging with SIP and NFO (New Fund Offering) inflows. Sectoral/thematic categories of schemes witnessed strong inflows due to NFO. NFOs seem to be the preferred route for investors to take a lump sum allocation to mutual funds since schemes have the flexibility to invest over a stipulated time period," Manish Mehta, National Head,-Sales, Marketing & Digital Business, Kotak Mahindra AMC, said.

Overall, the mutual fund industry has witnessed an inflow of ₹1.08 lakh crore in the month under review as compared to ₹1.9 lakh crore in July.

With these inflows, the industry's net assets under management rose to an all-time high of ₹66.7 lakh crore in August-end from ₹65 lakh crore in July-end.

According to the data, equity inflows have shown remarkable strength, with the last four months consistently exceeding ₹34,000 crore inflow. Further, except for the focused and equity-linked saving schemes (ELSS) categories, all the other categories such as Flexi Cap, Large & Mid Cap, Mid Cap and Small Cap witnessed good net inflows.

The correction in the markets in the initial part of August provided investors with a good buying opportunity. This is reflected in the strong net inflow numbers for August across the equity categories, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said.

Within the equity schemes, sector or thematic funds attracted investors with the highest net inflows of ₹18,117 crore during the month under review. However, flow in the segment was less compared to ₹18,386 crore in July and ₹22,352 crore in June.

Of the 6 new funds launched during the month, 5 were sector/thematic funds, which cumulatively garnered ₹10,202 crore. This helped the category accumulate a net inflow of ₹18,117 crores in August.

"The robust net inflows into NFOs point towards their continued appeal among investors. However, investors should be cautious while selecting funds, especially from the sector/thematic category. Such funds offer a very high-risk, high-return investment proposition and may not fit in the portfolio of every investor," Morningstar's Srivastava said.

Thematic funds through NFOs are garnering high inflows; new themes trying to benefit from government reforms also offer the opportunity to participate through tactical allocation, Akhil Chaturvedi, Chief Business Officer of Motilal Oswal AMC, said.

Apart from thematic funds, large-cap funds also attracted significant investments to the tune of ₹2,637 crore, alongside mid-cap and small-cap categories experiencing inflow of ₹3,055 crore and ₹3,209 crore, respectively, marking robust investor confidence in the broader market.

Debt-oriented schemes experienced net inflows of ₹45,169 crore in August, which was 62 per cent lower than ₹1.2 lakh crore seen in the preceding month.

Within the debt category, overnight funds saw the highest net inflows at ₹15,106 crore, followed by liquid funds and money market funds, with all three categories accounting for about 86 per cent of the overall inflow. This trend reflects a preference for low-risk and highly liquid investment options.

Additionally, investors showed a preference for categories with shorter maturity profiles, such as short-term, corporate bond and ultra-short-duration funds, for temporary parking of funds.

Also, Gold ETFs witnessed a net inflow of ₹1,611 crore last month, surpassing July's inflow of ₹1,337 crore. This increase was partly fuelled by a correction in gold prices during August, which prompted increased buying activity among investors.

Overall, the number of folios surpassed the 20 crore mark in August from 19.84 crore in July, indicating the increased reference for mutual funds as a saving vehicle and tool for wealth creation. The equity folios also increased by 3.16 per cent to 14.3 crore in August from 13.8 crore in July.