A sharp rally in equities, driven by better-than-expected corporate earnings, a drop in Covid-19 cases, pick-up in vaccinations, and easing of restrictions, resulted in record inflows into mutual fund equity schemes in July.

According to data released by the Association of Mutual Funds in India (AMFI) on Monday, equity funds registered the highest-ever net inflows of ₹22,584 crore compared to ₹5,988 crore in June.

“The trend of positive inflows into equity mutual funds has continued for the fifth consecutive month. A lot of investors who have accumulated higher savings in the last year due to lower spending, and were staying on the sidelines, are getting back. The decline of the second wave, strong recent returns from equities, and the stability of the markets despite the second wave have added to investor comfort and confidence,” said Arun Kumar, head of research, FundsIndia.

Setting new records

The MF industry saw several new records in July. Inflows through the Systematic Investment Plan (SIP) route hit a new high of ₹9,609 crore compared to ₹9,156 crore in June. New SIPs registered during July stood at 23.79 lakh, the highest ever registrations in a month, which led to the MF industry reporting a record 4.17 crore SIP accounts. About 90 lakh new SIP accounts have been added in the past year.

At 10.54 crore folios, the MF industry has added 50 lakh folios for the first time ever, within just two months. To put this into perspective, the MF industry added just 74 lakh folios between April 2020 and March 2021.

All these pushed up the overall Assets Under Management of the MF industry to a new high of ₹35.31-lakh crore in July.


New Fund Offers

Kavitha Krishnan, Senior Analyst, Morningstar India, said improving investor sentiment, driven by the surge in the markets and a positive investor response towards New Fund Offers (NFO), have contributed to the inflows last month. Four new equity fund offers collected ₹13,709 crore in July. Overall, the industry has mopped up ₹17,332 crore through 15 NFOs across different categories. For instance, ICICI Prudential Flexicap Fund garnered ₹9,808 crore, touted to be the highest-ever.

Riding on this NFO boom, the flexi-cap and sector funds logged the highest-ever inflows of ₹11,508 crore and ₹5,728 crore, respectively, followed by small- and mid-cap funds ₹1,779 crore and ₹1,488 crore, respectively.

Large- and mid-cap funds received ₹1,234 crore. Except for value fund and Equity Linked Saving Schemes. all equity plans registered net inflows. In the hybrid category, arbitrage funds received the highest investment of ₹14,924 crore and the dynamic asset allocation saw a net inflow of ₹2,453 crore.

Inflows up into debt funds

Inflows into debt funds increased to ₹73,694 crore against net investments of ₹3,566 crore in June. Liquid and money market funds logged highest flows of ₹31,740 crore and ₹20,910 crore, respectively.

NS Venkatesh, Chief Executive, AMFI, said: “The RBI’s accommodative stance, healthier earnings growth, vaccination-driven steady containment of the pandemic and global and domestic liquidity is driving the equity market to historic highs. Taking the cue, retail investors are participating in the equity rally, largely through mutual fund SIPs.”

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