Equity Mutual Fund Inflows Show a Slight Decline in July: AMFI Data

In July 2023, the equity mutual fund industry in India witnessed a slight decline in net inflows compared to the previous month, according to data released by the Association of Mutual Funds in India (AMFI).

Despite this dip, certain categories of funds managed to attract significant investments. The data also revealed notable trends in the debt-oriented schemes and the growing popularity of passive funds. Let’s delve into the details.

Equity Mutual Fund Inflows

The data from AMFI indicated that equity mutual funds recorded a net inflow of ₹7,625.96 crore in July 2023, which was slightly lower than the ₹8,637 crore inflow seen in June 2023. While this decline might be seen as a cause for concern, it’s important to note that certain categories within the equity segment still managed to attract substantial investments.

Among the equity categories, the small-cap category emerged as the top performer, receiving inflows of ₹4,171.44 crore. The multi-cap category followed closely with inflows of ₹2,500.47 crore. On the other hand, large-cap funds experienced outflows of ₹1,880 crore, while focused funds witnessed an outflow of ₹1,066.72 crore.

The performance of the equity markets in July also played a significant role in determining the inflows. The Nifty 50 index gained 1.4% during the month, while the Nifty Small-cap 100 index and the Nifty Midcap 100 index increased by 6.4% and 5.5% respectively.

These numbers offer valuable insights into the areas where market action was concentrated. It is evident that the inflow of ₹5,795 crore into mid and small-cap funds out of the total equity-based inflows of ₹7,626 crore reflects investor confidence in these segments.

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In contrast, large-cap funds experienced outflows for the third consecutive month, totaling ₹1,880 crore.

Debt-Oriented Schemes Rebound Strongly

While equity funds witnessed a slight decline in inflows, debt-oriented schemes rebounded strongly in July 2023. These schemes attracted a whopping ₹61,440 crore, representing a 146% year-on-year increase.

The rebound can be attributed to rising bond yields globally and the anticipation of a hawkish stance from the next RBI policy announcement.

Liquid funds, in particular, recorded the highest inflow of ₹51,938.41 crore in July. Additionally, the debt category as a whole attracted inflows of ₹61,440.08 crore during the month. Money market and short-term funds also contributed significantly, bringing in over ₹15,500 crore. Arbitrage funds added another ₹10,075 crore to the overall inflows.

Increasing Popularity of Passive Funds

Passive funds, including passive index funds, Exchange Traded Funds (ETFs), and Funds of Funds investing in ETFs, have gained traction among investors in India over the past few years. According to a study, the market share of passive funds in terms of assets under management (AUM) has increased from 1.4% in 2015 to over 17% in 2023.

These investment vehicles are designed to track market indices or specific market segments. They offer investors a cost-effective way to gain exposure to a wide range of stocks or other assets.

Recognizing the growing popularity of passive funds, the capital markets regulator, Securities and Exchange Board of India (SEBI), is working with the mutual fund industry to introduce ‘MF Lite’ regulations for these funds. This move aims to reduce compliance burdens and foster innovation in the industry.

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Retail Investors and the Rise of SIPs

The surge in retail investors’ interest in mutual funds has been a driving force behind the industry’s impressive inflows across various scheme categories.

Systematic Investment Plans (SIPs) have been a star performer, witnessing a record-breaking 33,06,337 new SIP accounts registered in July 2023. These accounts contributed a total of ₹15,245 crore in monthly investments.

The number of SIP accounts reached its highest ever at 6,80,52,826 in July 2023, compared to 6,65,37,033 in June 2023. The SIP Assets Under Management (AUM) also saw a significant increase, reaching ₹8,32,275 crore in July 2023, compared to ₹7,93,609 crore in June 2023.

The rise in SIP investments can be attributed to the mutual fund industry’s extensive awareness campaigns, tapping into the aspirations and wealth of investors across the country.

Even investors in B30 cities, traditionally underserved areas, are now participating in the market growth through SIPs in equity mutual funds.

Key Highlights from AMFI Data for July 2023

Here are some key highlights from the AMFI Mutual Fund Industry Monthly Data for July 2023:

  • The Mutual Fund Industry’s Net Assets Under Management (AUM) stood at ₹46,37,565 crore, while the Average Assets Under Management (AAUM) reached ₹46,27,687 crore.
  • Mutual Fund Folios reached an all-time high of 15,14,21,270 in July 2023, compared to 14,91,31,708 in June 2023.
  • Retail Mutual Fund Folios, which include equity, hybrid, and solution-oriented schemes, also reached an all-time high of 12,08,50,415 in July 2023, compared to 11,90,63,434 in June 2023.
  • The Retail Assets Under Management (AUM) for equity, hybrid, and solution-oriented schemes amounted to ₹24,17,268 crore in July 2023, with an Average AUM of ₹23,77,395 crore.
  • In July 2023, a total of 17 new open-ended schemes were launched, raising a cumulative amount of ₹6,723 crore.
  • SIP contributions reached an all-time high of ₹15,244.73 crore in July 2023, with 33,06,337 new SIP accounts registered during the month.
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Although the net inflows into equity mutual funds experienced a slight decline in July 2023, certain categories, such as small-cap and multi-cap funds, continued to attract significant investments. On the other hand, large-cap funds faced outflows for the third consecutive month. Debt-oriented schemes rebounded strongly, driven by rising bond yields globally and the anticipation of a hawkish RBI policy.

The growing popularity of passive funds, as indicated by their increasing market share, reflects investors’ interest in cost-effective investment options. The rise in SIP investments, particularly from retail investors, highlights the industry’s success in creating awareness and providing accessible investment avenues.

With the mutual fund industry’s assets under management growing by 25% year-on-year, it is clear that mutual funds continue to play a crucial role in the financialization of savings and the growth of the Indian economy.

By offering a diverse range of options suited to investors’ risk profiles and goals, mutual funds provide an opportunity for individuals to participate in India’s growth story with investments as small as ₹500 per month.

As the industry continues to evolve and innovate, it is expected that mutual funds will remain a preferred choice for both retail and institutional investors in the years to come.

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