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Undeterred by the stock market volatility, uncertainty due to the Ukraine-Russia war and high inflation, equity mutual funds continue to remain attractive choice for investors for the 15th straight month, registering a net inflow of Rs 18,529 crore in May on robust SIP numbers.
This was higher than Rs 15,890 crore net inflow in April, data from the Association of Mutual Funds in India (AMFI) showed on Thursday.
Equity schemes have been witnessing net inflow since March 2021, highlighting the positive sentiment among investors.
Prior to this, such schemes had consistently witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.
All the equity-oriented categories received net inflows in May with flexi cap funds category being the biggest beneficiary with a net inflow of Rs 2,939 crore.
Besides, large-cap, large & mid-cap fund and sectoral/thematic funds witnessed over Rs 2,200 crore net infusion each.
"The consistent SIP flows are supporting the net positive sales numbers in equities.
"Through the ongoing volatility, we see continued interest amongst retail investors to allocate to equity MFs.
"The spread of new flows is well diversified across categories," Akhil Chaturvedi, chief business officer, Motilal Oswal AMC, said.
Kavita Krishnan, senior analyst manager research, Morningstar India, said the Indian equity market remains an attractive choice for investors across emerging markets despite valuations still being at a premium.
"A strong underlying structural story supports the consistent inflows, despite the challenges that we face at a macro level.
"The government's focus on curbing inflation and positive measures towards this direction has also led to increased investor confidence," she added.
Gopal Kavalireddi, Head of Research at FYERS is of the view that even with markets facing high volatility, uncertainty due to the Ukraine-Russia war, supply chain disruptions, high inflation and lower economic growth projections, investors are opting for equity mutual fund.
Inflow through SIP (Systematic Investment Plan) rose to Rs 12,286 crore in May from Rs 11,863 crore in April, indicating that retail investors continue to hold confidence on equity investments.
This is the ninth consecutive month of SIP inflow being greater than Rs 10,000 crore, a trend which started in September 2021 with Rs 10,351 crore inflow.
"Retail Mutual Fund investors continue to embrace SIP mode and Equity and hybrid asset class for their long-term savings, and at the same time reallocating their savings in fixed income asset class more towards liquid and overnight categories and safer government securities schemes, owing to rising interest rate scenario," N S Venkatesh, chief executive, AMFI said.
According to him, the retail investor confidence into equity asset class stems from the fact that India growth story continues to be promising and intact relative to other major economies.
Despite rising inflation and interest rates, challenging macro-economic scenario, GDP forecast continues to be pegged at 7.2 per cent by RBI.
DII (Domestic Institutional Investors) investment flows into Indian equities continue to be robust, despite foreign portfolio investors (FPIs) outflows.
Apart from equity, gold exchange traded funds (ETFs) category saw an inflow of Rs 203 crore.
On the other hand, the debt category saw a net outflow of Rs 32,722 crore in May after witnessing a net inflow of Rs 69,883 crore in the preceding month.
Overall, the mutual fund industry registered a net withdrawal of Rs 7,532 crore last month as compared to a net inflow of Rs 72,846 crore in April.
"Mutual fund negative net flow is an outcome of the rising interest rate cycle, with investors redeeming their investments from money market and low to short-duration funds," he added.
The overall outflow pulled down the average assets under management (AUM) of the industry to Rs 37.37 lakh crore at the end of May from Rs 38.89 lakh crore at April-end.
During the month, index funds and other ETFs combined received net inflows of Rs 11,779 crore.
Passively managed funds have gained prominence amongst investors over recent times, and they have been actively adding these funds in their portfolio from diversification perspective.