Equity MFs mutual funds continued to attract strong inflows in July, even amidst the market volatility caused by the Union Budget. Active MF schemes brought in Rs 37,113 crore, marking the second-highest monthly inflow ever, following a record Rs 40,608 crore in June.
Systematic Investment Plan (SIP) contributions also hit a new peak, with Rs 23,332 crore, reflecting the sustained financial discipline among retail investors.
“Mutual funds have become a cornerstone of retail investors’ financial strategies, enabling them to build wealth systematically over time,” said Venkat Chalasani, CEO of the Association of Mutual Funds in India (Amfi).
The surge in inflows comes alongside a wave of new fund offerings (NFOs), particularly in the thematic category. Over the past three months, active equity NFOs have garnered Rs 37,668 crore, representing a third of the total inflows during the May-July period.
“Investors are increasingly shifting their focus from the core, stable part of their portfolios to more tactical or satellite investments,” said Swarup Mohanty, Vice-Chairman & CEO of Mirae Asset Investment Managers (India). “We’ve seen heavy inflows into small-cap funds over the past two years, but that trend is now tapering off as investors pivot towards sectoral funds. It remains to be seen whether this represents a shift in risk appetite or is simply a case of short-term return chasing.”
Equity mutual fund inflows for FY25 have already reached two-thirds of the total inflows recorded in FY24, with net inflows standing at Rs 1.3 trillion. The combination of these record inflows and mark-to-market gains has added Rs 5.4 trillion to the assets under management (AUM) of active equity schemes over the past four months. According to Amfi data, the AUM of these schemes has surged by 25%, rising from Rs 23.5 trillion at the end of March 2024 to Rs 29.3 trillion.
The robust inflows across various fund categories, coupled with an increase in asset values, particularly in equity holdings, have driven the industry’s total AUM to nearly Rs 65 trillion—a 6% increase from the previous month.
In July, the Nifty 50 index, a key equity benchmark, gained about 4%, supported by strong institutional inflows. Other fund categories also saw substantial inflows, with debt funds attracting nearly Rs 1.2 trillion, hybrid funds bringing in Rs 17,436 crore, and passive schemes securing Rs 14,778 crore.
Akhil Chaturvedi, Executive Director & Chief Business Officer at Motilal Oswal AMC, observed that some investors might be reallocating from equity to debt due to market volatility and global uncertainties. “The 9% drop in equity MF inflows, along with the rise in debt fund investments, reflects these concerns. However, investors with a long-term view should stay invested in equities, as they remain a crucial part of a well-diversified portfolio despite short-term market fluctuations,” he advised.
However, some industry experts are raising concerns about the growing interest in riskier sectoral and thematic schemes. Swarup Mohanty, Vice-Chairman & CEO of Mirae Asset Investment Managers (India), pointed out that the inflow data suggests a shift in investor sentiment.
A Systematic Investment Plan (SIP) is a smart and disciplined way to invest in mutual funds. With an SIP, you can invest a fixed amount of money regularly—whether monthly, quarterly, or any interval that suits you—into a mutual fund of your choice. This method helps you buy units of the mutual fund over time, which can reduce the impact of market ups and downs through something called rupee cost averaging.
Here are some key benefits of SIPs:
1. Rupee Cost Averaging : By consistently investing the same amount, you automatically buy more units when prices are low and fewer when prices are high, potentially lowering your average cost per unit over time.
2. Discipline : SIPs instill a habit of regular saving and investing, helping you consistently set aside money towards your financial goals.
3. Compounding : With SIPs, the returns you earn are reinvested, allowing your money to grow exponentially over the long term through the power of compounding.
4. Convenience : Setting up an SIP is simple and hassle-free, with automatic deductions from your bank account, so you don’t have to worry about remembering to invest each month.
5. Flexibility : SIPs offer flexibility—you can start with a small amount, pause if needed, adjust the investment amount, or stop the plan entirely without penalties.