Equity mutual funds see inflows for sixth straight month

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Mutual fund investors pumped in Rs 8,666.68 crore into equity schemes in August, marking sixth straight month of inflows into equity funds, according to data from the Association of Mutual Funds of India. The inflows drove the net assets under management of the mutual fund industry to over Rs 36 lakh crore for the first time and stood at Rs 36.59 lakh crore at the end of August. 

Monthly contributions via systematic investment plans also hit a new high of Rs 9,923.15 crore. At the same time, folios under retail schemes, too, were at all-time high of 8.95 crore. According to AMFI, between April and August, 78 lakh retail folios have been added, compared with 18 lakh folios a year ago. 

The flows into equity funds were driven largely by flexicap, thematic and focused funds. However, the overall inflows in equity funds in August were 61 per cent lower than compared with July, with outflows particularly from large cap and small cap fund categories, suggesting that some investors may be turning cautious since equity markets have rallied to record high. 

“There is a net outflow in the small cap category indicating that investors may have started booking profits as market and small cap index continue to surge. This could be a good strategy to book some profit right now particularly if your investments are in small cap funds,” said Harshad Chetanwala, a certified financial planner and co-founder at MyWealthGrowth.com.

The dynamic asset allocation/ balanced advantage fund category also seems to be attracting investors in the backdrop of the record high markets. In August, this category saw inflows of Rs 16,571 crore. The new fund offer (NFO) of SBI Balanced Advantage Fund collected over Rs 13,000 crore last month, which is highest among the equity NFOs.  

“There is a significant shrinkage in the net flow for equity category and corresponding bump in net inflow of the balanced advantage category. This leads one to believe that on aggregate industry level, large balanced advantage NFO has garnered a lot of traction by way of switches from equity to balanced advantage category,” said Aashish Somaiyaa, CEO at White Oak Capital. 

The BSE Sensex hit a life high of Rs 58,553.07 points on September 7, 2021, while the NSE Nifty 50 index hit 17,436.50 for the first time.

If one is investing at these levels, especially via SIPs, then one must have at least 5-7 year time horizon, say analysts.

“An investor would be doing a big disservice to his long term returns if a market crash in the near future scares him out of his SIPs. He should ignore the market noise and religiously keep doing his SIPs even if he is starting out now. Patience and consistency matters more here than timing the market,” said Rahul Shah, co-head of research at Equitymaster. 

Meanwhile, debt funds saw inflows of Rs 1,074 crore in August. While there were outflows of more than Rs 12,000 crore from overnight and liquid funds, it was offset by inflows in categories like floating rate debt funds, corporate bond funds and money market funds.

Corporates pulling out their short-term money parked in overnight funds and liquid funds for their business activities has led to the outflows across these categories, said Kavitha Krishnan, senior analyst manager research at Morningstar India.