Net inflows into active equity mutual fund schemes (MF) increased by 31 percent in September compared to August, reaching a five-month high of 38,307 crore rupees. This growth is attributed to investors continuing to increase investments in small and mid-cap company funds.
These two categories, whose combined net inflows have been growing for the last four consecutive months, attracted a record 15,740 crore rupees in September, which is 5 percent more than in August. Himanshu Srivastava, Research Manager at Morningstar Investment Research India, noted that they accounted for about 44 percent of total net equity inflows in September. He suggested that the sustained interest in these segments, despite the correction in broader markets, indicates continued investor confidence in the long-term growth potential of emerging enterprises.
The market correction in September occurred after a period of growth in mid and small-cap stocks in previous months. The Nifty Midcap 100 index fell by 7.6 percent, and the Nifty Smallcap 250 dropped by 3.1 percent. These indices had shown growth in each of the previous five months, allowing them to outperform large index funds, which struggled since the start of the conflict between the United States and Iran in late February.
Manish Mehta, Business Director at SBI Mutual Fund, stated that investors appear to have used the market decline as an opportunity to top up their portfolios and average down the cost of asset acquisition.
Inflows also strengthened in other categories. Flexicap funds demonstrated a monthly increase in net inflows of 32 percent, reaching 6,702 crore rupees, while large-cap funds increased inflows by 860 crore rupees after recording net outflows exceeding 1,000 crore rupees for the previous two months.
Saugata Chatterjee, President and Deputy CEO of Nippon India Mutual Fund, believes that the return of positive inflows to large-cap funds is encouraging, especially given that valuations have become relatively attractive, creating favorable prospects for this category in the future.
The overall growth in net inflows into active equity schemes coincided with the rise in gross investments in active equity schemes to a six-month high, while withdrawals slowed for the second consecutive month, reaching the lowest level in four months. Net inflows in August were 29,329 crore rupees.
Inflows were supported by Systematic Investment Plans (SIPs), where growth was almost 200 crore rupees, reaching a new high of 32,490 crore rupees, according to data published by the Association of Mutual Funds in India (Amfi). Venkat Chalasani, CEO of Amfi, noted that this reflects the continued participation of investors in systematic investing.
However, debt funds recorded a net outflow of 1.8 trillion rupees. This was largely due to the withdrawal of funds at the end of the quarter from liquid and other short-term funds to cover advance tax payments and meet other liquidity needs. These outflows, along with fair value losses, led to a 5 percent year-on-year decline in assets under management to 87 trillion rupees.