Strong inflows in new fund offers (NFOs) and a stable SIP book helped equity mutual funds attract a net investment of Rs 8,666 crore in August, making it the sixth consecutive monthly infusion, amid an uptrend in stock markets.
This was much higher than a net inflow of Rs 22,583 crore seen in July, data from the Association of Mutual Funds in India (AMFI)showed on Wednesday.
Equity schemes saw net inflow of Rs 5,988 crore in June, Rs 10,083 crore in May, Rs 3,437 crore in April and Rs 9,115 crore in March. Prior to this, equity schemes had consistently witnessed outflows for eight months from July 2020 to February 2021.
The inflow pushed assets under management (AUM) of the mutual fund industry to an all-time high of Rs 36.6 lakh crore at August-end from Rs 35.32 lakh crore at July-end.
"Overall positive flows in the open-ended mutual fund (MF) schemes and market indices touching all-time high, helped the Indian MF industry's net AUMs breach record Rs 36 lakh crore milestone in August 2021," N S Venkatesh, Chief Executive, AMFI, said.
According to the data, inflows into equity and equity-linked open ended schemes were at Rs 8,666.68 crore in August.
Kavitha Krishnan, Senior Analyst Manager Research, Morningstar India, said the record flows into NFOs combined with a stable systematic investment plan (SIP) book have largely contributed to the flows into equity.
"The industry continues to see net inflows in August too, as investors have invested Rs 6,863 crore in equity oriented NFOs," Harshad Chetanwala, co-founder Mywealthgrowth.com, said.
Arun Kumar, Head of Research, FundsIndia, said many investors who were staying on the sidelines are slowly getting back. This trend is also getting reflected in the record NFO collections.
"The decline of the second wave, increase in vaccinations, sharp equity rally in the recent past, and the stability of the markets despite the second wave have added to investor comfort and confidence," he added.
Within the categories of equity funds, flexi-cap segment saw highest net infusion of Rs 4,741 crore, followed by focussed fund that witnessed a net investment of Rs 3,073 crore and sectoral funds that attracted Rs 1,885 crore.
However, multi-cap, large-cap, small-cap funds, equity linked saving schemes (ELSS) and value fund witnessed outflows last month.
Mywealthgrowth.com's Chetanwala said the net outflow to the tune of Rs 163 crore in small-cap category indicated that investors may have started booking profits as market and small-cap index continue to surge.
According to him, this could be a good strategy to book some profit right now particularly if an investor's investments are in small cap funds.
"Outflow in small-cap is in line with valuations in this space going high and higher inflow in dynamic asset allocation is in right direction as investors are indecisive about allocating capital in pure equity strategy and valuation driven strategy in equity allocation is a better strategy," Tarun Birani, Founder and CEO, TBNG Capital Advisor, said.
Apart from equities, investors put in Rs 18,706 crore in hybrid funds in the month under review. This included Rs 16,571 crore in arbitrage funds.
The number of SIP accounts has risen to record 4.32 crore in August from 4.17 crore in the preceding month. Besides, monthly SIP contribution too reached an all-time high at Rs 9,923.15 crore during the period under review from Rs 9,609 crore in July.
The SIP number is reflective of established and rising retail preference towards mutual funds as a long-term wealth creation avenue, Amfi's Venkatesh said.
"Continued robust month-on-month fund mobilization in arbitrage and dynamic asset allocation schemes and affinity towards thematic / sectoral and diversified flexicap schemes since the start of the new fiscal, FY22, including through SIPs has overshadowed profit-booking during the last few months," he added.
Aashwin Dugal, Co Chief Business Officer, Nippon India Mutual Fund said with lower yields in debt instruments including banks FDs and flat returns in gold, investors are eager to embrace equity funds.
"On macro front, positive sentiment unleashed by better than expected economic recovery post first COVID wave, accommodative US Fed stance has only added to the strong belief. Retail participation has continued to gain momentum and is visible in SIP book growth over the last few months, especially since March this year," he added.
Even though markets have scaled historic highs, he believes that two factors will continue to strengthen retail flows -- relatively lower yields in other asset classes over last few months and mounting belief in the fundamental strength of the Indian economy.
Further, gold exchange traded funds (ETFs) witnessed net inflow of Rs 24 crore last month, compared to net outflow of Rs 61.5 crore in July.
In addition, investors infused a net sum of Rs 1,074 crore in debt mutual funds in the month under review compared to a net Rs 73,964 crore in July.
In the debt schemes, floater funds attracted the largest chunk of inflow at Rs 9,991 crore, followed by corporate bond funds at Rs 3,065 crore. However, liquid funds saw a net withdrawal of Rs 11,808 crore.
Overall, the mutual fund industry witnessed a net inflow of Rs 32,976 crore across all segments last month, compared to an inflow of Rs 1.14 lakh crore in July.