MFs Boom Despite Market Volatility

Mutual Fund inflows in FY25 have already reached two-thirds of the total inflows seen in the entire FY24, with net inflows standing at Rs 1.3 trillion.

Inflows into equity mutual funds continued their strong momentum in July, despite the market volatility triggered by the Union Budget.

Active MF schemes received Rs 37,113 crore (Rs 371.13 billion), the second-highest monthly inflows ever, after attracting a record Rs 40,608 crore (Rs 406.08 billion) in June.

Systematic Investment Plan (SIP) contributions reached an all-time high of Rs 23,332 crore (Rs 233.32 billion), indicating continued financial discipline among retail investors.

"Mutual funds have become an integral part of retail investors' financial strategies, helping them build wealth systematically over time," said Venkat Chalasani, CEO, Association of Mutual Funds in India (Amfi).

The surge in inflows coincides with a rush of new fund offerings (NFOs), particularly in the thematic space.

Active equity NFOs collected Rs 37,668 crore (Rs 376.68 billion) in the past three months, accounting for a third of aggregate flows during the May-July period.

Some industry experts have expressed concerns over the shift in investor focus towards the riskier sectoral and thematic schemes.

Swarup Mohanty, vice-chairman and CEO at Mirae Asset Investment Managers (India), noted that the inflow data showed a change in investor mood.

"Investors are shifting their focus from the core side of the portfolio to the tactical or satellite side of the portfolio," said Mohanty.

"This is evident from the fact that in the last two years, we saw smallcaps getting heavy inflows, which now is tapering as investors are now shifting to sectoral funds," Mohanty added.

"It will be interesting to see if this is a shift in risk profile or just a blatant near-term return chasing," Mohanty said.

Overall, equity MF inflows in FY25 have already reached two-thirds of the total inflows seen in the entire FY24, with net inflows standing at Rs 1.3 trillion.

The record inflows, combined with mark-to-market gains, have added Rs 5.4 trillion to the assets under management (AUM) of active equity schemes in the past four months.

Their AUM, which stood at Rs 23.5 trillion at the end of March 2024, rose 25 per cent during the period to Rs 29.3 trillion, shows Amfi data.

The strong inflows across various fund categories, combined with the appreciation in asset values particularly in equity holdings, propelled the industry's assets under management (AUM) to nearly Rs 65 trillion, marking a 6 per cent increase from the previous month.

The Nifty 50 index, a benchmark equity gauge, gained approximately 4 per cent in July, underpinned by healthy inflows from institutional investors.

Inflows were also robust in other categories with debt funds raking in nearly Rs 1.2 trillion, hybrid funds garnering Rs 17,436 crore and passive schemes cornering Rs 14,778 crore.

Akhil Chaturvedi, executive director and chief business officer at Motilal Oswal AMC, believes some investors may be shifting money from equity to debt.

"The 9 per cent drop in equity MF inflows, coupled with increased debt fund investments, can be attributed to market volatility and global concerns among a few investors," he noted, adding that investors with a long-term perspective should maintain their equity investments."

Feature Presentation: Ashish Narsale/Rediff.com