The downtrend in equity mutual fund inflow continued for the second month in a row and halved to ₹3,240 crore last month against ₹6,480 crore in April, as almost all the major categories witnessed a net outflow.

The highest outflow of ₹1,362 crore was registered in large-cap fund followed by outflow of ₹943 crore from value fund, ₹505 crore from Equity Linked Saving Schemes, ₹368 crore from flexi-caps and ₹169 crore from focused funds, as investors pulled out money buoyed by the recent rally in markets, according to data released by the Association of Mutual Funds in India (AMFI) on Friday.

If not for small- and mid-cap funds inflow of ₹3,282 crore and ₹1,196 crore, the overall equity fund flow would have turned negative.

Among hybrids, the arbitrage funds saw highest inflow of ₹6,640 crore, while balanced hybrid and dynamic allocation recorded an outflow of ₹997 crore and ₹757 crore, respectively.

Investors keen on profit-booking

NS Venkaesh, CEO, AMFI, said investors preferred booking profit and moving their investment to small-cap funds, as these stocks have lost about 50 per cent of value in the last two-three years.

Small-cap funds will continue to attract value investors as they have not recouped the lost ground completely, he added.

The investment through Systematic Investment Plan hit a new high of ₹14,749 crore against ₹13,727 crore, as deduction for the last two days of April were executed in May since they were holidays.

Melvyn Santarita, Analyst - Manager Research, Morningstar India, said both the mid- and small-cap indices logged a tepid performance last year after a major bull run in the previous two years.

Despite the bearish trend, investors were persistent in investing in both these categories as mid-cap fund last registered a net outflow in February 2021 and the same for small-cap was September 2021, he said.

Debt funds

Given the ample liquidity in the system, debt mutual funds recorded net inflow of ₹45,959 crore with liquid fund alone contributing an inflow of ₹45,234 crore, while money market funds recorded an inflow of ₹8,731 crore.

However, there was an outflow from most of other funds, including overnight fund (₹18,910 crore), floater (₹2,378 crore) and credit risk (₹289 crore).

Venkatesh said the industry’s asset under management has hit a new high of ₹43.20-lakh crore with investors choosing mutual funds as a preferred investment vehicle.

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