Equity mutual funds inflow drops 43% to Rs 8,898 crore in July

Equity mutual funds attracted Rs 8,898 crore in July, a 43 per cent decline compared to the preceding month as markets continued to remain volatile amid concerns over inflation and rate hike expectations.

For the 17th straight month, equity mutual funds witnessed inflows in July.

The net inflows in July were lower compared to Rs 15,495 crore seen in June, Rs 18,529 crore in May and Rs 15,890 crore in April, according to data released by Association of Mutual Funds in India (Amfi) on Monday.

Equity schemes have been witnessing net inflow since March 2021.

These schemes had witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.

"Markets continue to remain volatile as concerns over an inflationary trend continue to mount.

"RBI's rate hike cycle and expectations of further hikes in August probably led to investors adopting a cautious stance," Kavitha Krishnan, senior analyst – manager research at Morningstar India, said.

Weakening rupee and geopolitical tension which started in central Europe earlier this year and the latest sparks in the strait of Taiwan, are the other factors for the drop in equity inflows, Nitin Rao, Head Products & Proposition of Epsilon Money Mart, said.

"July seems to be the month where investors have taken some profits off as markets went up.

"Net sales in equity has plummeted and momentum was coming down all through last few months as the markets were correcting but July was a steep fall and excluding  SIP numbers, we might have witnessed actual net negative sales in July," Akhil Chaturvedi, CBO of Motilal Oswal AMC, said.

All the equity-oriented categories received net inflows in July with the Small Cap Fund category being the biggest beneficiary with a net inflow of Rs 1,780 crore.

This was followed by the Flexi Cap Fund fund that witnessed Rs 1,381 crore net infusion.

Besides, Large Cap Fund, Large & Mid Cap Fund and Mid Cap Fund witnessed over Rs 1,000 crore net inflow each.

"Flows into equity mutual funds have sustained at very healthy levels for many months now and we expect this to continue.

"There will be ups and downs, as always," Rajiv Shastri, director and CEO of NJ AMC, said.

Inflows through Systematic Investment Plans (SIPs) were at Rs 12,140 crore last month compared to Rs 12,276 crore in June.

Besides, the number of SIP accounts reached an all-time high at 5.61 crore in July.

N S Venkatesh, chief executive of Amfi, said that continued monthly SIP contribution of over Rs 12,000 crore reinforces mutual funds as a preferred investment avenue.

Positive flows in almost all categories of mutual fund schemes barring hybrid funds, stand in good stead as economic recovery would pace up in the next few quarter, he added.

Apart from equity, debt mutual funds witnessed an inflow of Rs 4,930 crore last month after witnessing a net outflow of Rs 92,247 crore in June.

However, Gold Exchange Traded Funds (ETFs) experienced a net outflow of Rs 457 crore in July, which was in sharp contrast to a net infusion of Rs 135 crore seen last month.

Overall, the mutual fund industry registered a net inflow of Rs 23,605 crore in July compared to a net withdrawal of Rs 69,853 crore in June.

This was mainly on account of higher levels of redemptions from debt mutual funds.

The inflow pushed the Assets Under Management (AUM) of the industry to Rs 37.75 lakh crore at the end of July from Rs 35.64 lakh crore at the end of June.