Equity Mutual Fund Inflows Decline in July Amid Sluggish Large-Cap and Mid-Cap Investments
Despite the overall decline in equity mutual fund inflows, the monthly gross systematic investment plan (SIP) inflows reached a new record high of Rs 23,332 crore in July
The open-ended equity mutual fund space witnessed a decline in inflows during July, slipping by 8.61% to Rs 37,113.39 crore, as per the data released by the Association of Mutual Funds of India (AMFI) on August 9. This decline follows a record high in June, where inflows surged by 17% to Rs 40,608.19 crore.
A Record Month for SIP Inflows
Despite the overall decline in equity mutual fund inflows, the monthly gross systematic investment plan (SIP) inflows reached a new record high of Rs 23,332 crore in July, up from Rs 21,262 crore in June. This indicates a continued commitment from retail investors to systematic investment, highlighting the long-term confidence in equity markets.
Equity Funds Maintain Positive Streak for 41 Months
One of the key takeaways from the AMFI data is that inflows into open-ended equity funds have remained positive for the 41st consecutive month. This is a testament to the resilience and attractiveness of equity mutual funds as an investment avenue, even amidst fluctuating market conditions.
Sectoral and Thematic Funds: The Bright Spot
While overall equity mutual fund inflows slowed, sectoral and thematic funds continued to attract significant investor interest. In July, these categories saw net inflows of Rs 18,386.35 crore, driven by nine new fund offers (NFOs) that collectively garnered Rs 12,974 crore. This reflects a growing trend among investors to bet on specific sectors or themes that they believe will outperform in the future.
Sluggish Large-Cap and Mid-Cap Inflows
The decline in overall equity mutual fund inflows can be attributed to a significant drop in investments in large-cap and mid-cap funds. Inflows into large-cap funds slumped by 31% to Rs 670.12 crore, while mid-cap funds also witnessed a slowdown in fresh investments. Despite this, small-cap funds managed to attract net inflows of Rs 2,109.20 crore, while mid-cap funds garnered Rs 1,644.22 crore in fresh investments.
Multi-Cap Funds: A Silver Lining
Interestingly, multi-cap funds, which are required to invest at least 25% each in large-cap, mid-cap, and small-cap stocks, bucked the trend by witnessing a 50% increase in inflows, totaling Rs 7,084.61 crore. This suggests that investors are diversifying their portfolios across market capitalizations to manage risk and maximize returns.
Debt Mutual Funds Rebound with Significant Inflows
In the fixed-income category, debt mutual funds saw a dramatic reversal in fortunes, recording net inflows of Rs 1,19,587.60 crore during July. This contrasts sharply with June 2024, when debt funds experienced net outflows of Rs 1,07,357.62 crore. The short-term liquid funds category led the charge with net inflows of Rs 70,060.88 crore, while money market funds saw fresh investments of Rs 28,738.03 crore.
However, not all fixed-income categories experienced positive flows. Medium Duration Funds, Credit Risk Funds, and Gilt Funds with 10-year constant duration categories faced minor selling pressure.
Overall Mutual Fund Inflows Surge in July
Despite the slowdown in equity fund inflows, the mutual fund industry as a whole saw net inflows of Rs 1,89,141.39 crore in July, bolstered by the strong performance of debt mutual funds and consistent SIP investments.
Hybrid Funds See Strong Inflows
In the hybrid fund category, which invests in a mix of commodities, equity, and debt, there were net inflows of Rs 17,436.09 crore during July. This highlights investor preference for diversified investment strategies that can balance risk and reward across multiple asset classes.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.