Equity-focused mutual fund (MF) schemes received net inflows of Rs 8,898 crore in July – the lowest since October 2021 – and half of the average monthly inflows received in the first half of the year. ‘calendar year.
Industry players blamed volatile market conditions and profit taking on the sharp drop in net inflows.
In June, markets saw a sell-off amid foreign fund-backed selling on fears of a hard landing for the global economy due to aggressive monetary tightening by the US Federal Reserve.
Markets made a comeback in July. However, uncertain market conditions could have weighed on sentiment. In addition, some investors cashed in, taking advantage of last month’s 9% rebound, industry players said.
“Investors could have taken profits as the markets rose. Momentum has waned throughout the past few months as markets corrected. Without the Systematic Investment Plan (SIP) figures, we could have seen actual negative net sales in July,” said Akhil Chaturvedi, Commercial Director of Motilal Oswal MF.
Inflows via SIPs remained strong at Rs 12,139 crore – only slightly below Rs 12,276 crore the previous month. Sustained inflows via the SIP channel supported 17 consecutive months of positive inflows into equity programs. That, in turn, has helped markets offset the over $30 billion in sell-offs by foreign portfolio investors since October 2021.
“Continued retail investor interest is reflected in all-time SIP assets under management (AUM). The positive flows in almost all of MF’s plan categories except hybrid funds are very helpful as the economic recovery will gain momentum over the coming quarters,” said NS Venkatesh, Managing Director of the Association of mutual funds in india.
AUM for SIPs crossed the Rs 6 trillion mark for the first time in July. The AUM of the shares rose to 14.15 trillion rupees from 12.86 trillion rupees at the end of June. The sharp rise in the market boosted equity assets under management. The industry average AUM rose to Rs 37.8 trillion. By June, they had fallen to an 11-month low of 35.64 trillion rupees.
The increase in assets under management is largely explained by the appreciation of equity assets. Debt AUM was flat month-on-month at 12.6 trillion rupees.
Net inflows into debt programs remained subdued at Rs 4,930 trillion in July, with cash redemptions (outflows of Rs 7,693 crore), corporate bond funds (Rs 2,582 crore ) and funds from the banking and public sector (Rs 2,810 crore) encumbering the overall tally.
Overnight funds, meanwhile, recorded the highest net inflows of Rs 19,919 crore.
Low-cost investment avenues like exchange-traded funds and index funds saw strong net flows of nearly Rs 14,000 crore.
Market participants expect a recovery in flows in August, thanks to the strong pipeline of new fund offerings. Additionally, a strong market rebound could entice investors who are staying on the sidelines to invest.
Benchmarks are now up nearly 15% from their June lows.
India is the best performing global market during this period. However, the surge in markets has once again made valuations expensive relative to historical averages.
Instead of looking to time the markets, industry players advised investors to go the SIP route to overcome volatility.