Equity mutual funds see Rs 22,583-cr inflow in July supported by heavyweight NFOs

The strong inflows in new fund offers (NFOs) helped equity mutual funds to clock a staggering net investment of Rs 22,583 crore in July, making it the fifth consecutive monthly infusion, amid rally in stock markets.

This was much higher than a net inflow of Rs 5,988 crore seen in June, data from the Association of Mutual Funds in India showed on Monday.

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Equity schemes saw net inflow of Rs 10,083 crore in May, Rs 3,437 crore in April and Rs 9,115 crore in March. Prior to this, equity schemes had consistently witnessed outflows for eight months from July 2020 to February 2021.

The inflow pushed assets under management (AUM) of the mutual fund industry to an all-time high of Rs 35.32 lakh crore in July-end from Rs 33.67 lakh crore in June-end.

According to the data, Inflows into equity and equity-linked open ended schemes were at Rs 22,583.52 crore in July.

Kavitha Krishnan, Senior Analyst Manager Research, Morningstar India, said an improving investor sentiment, driven by a surge in the markets and a positive investor response towards NFOs have contributed to the inflows.

"With equity capital markets gaining robust traction, the effect is distinctly visible in the heavy influx into equity mutual funds, especially categories of largecap and flexicap," Anand Dalmia, Co-founder of Fisdom, said.

He, further, said that prevailing market dynamics have been key to sparking a reversal for hybrid and dynamic asset allocation schemes, which witnessed healthy allocations by investors. The slew of heavyweight NFOs has played a critical role in mobilising fresh inflows.

Aashish Somaiyaa, CEO at White Oak Capital, said over 50 per cent of net inflow in equity is attributable to NFOs as asset management companies (AMCs) try to complete their range as per Sebi scheme categorization norms and some more through thematic launches.

Barring, equity linked saving schemes (ELSS) and value fund, which saw withdrawal to the tune of Rs 512 crore and Rs 462 crore, respectively, all the equity schemes witnessed inflow last month.
Within the categories of equity funds, flexi cap segment saw highest net infusion of Rs 11,508 crore.

This large inflow in flexi-cap can be attributed to ICICI Prudential Flexicap fund and other NFOs totalling a mammoth Rs 13,709 crore, Gopal Kavalireddi, Head of Research at FYERS said.

Apart from equities, investors put in Rs 19,481 crore in hybrid funds in the month under review. This included over Rs 14,924 crore in arbitrage funds.

Arun Kumar, Head of Research, FundsIndia, said that 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," he added.

N S Venkatesh, Chief Executive, AMFI said that RBI's accommodative stance, healthier earnings growth, vaccination-driven steady containment of COVID pandemic and global and domestic liquidity is driving the equity markets to historic highs.

"Taking cue, retail investors too are participating in the equity rally, largely through mutual fund SIPs, on a continued rising quantum at record levels," he added.
Rising affinity towards mutual fund asset class is seen from steep jump in retail SIP accounts at 4.17 crore and monthly SIP contribution at Rs 9,609 crore in July.

Further, gold exchange traded funds (ETFs) witnessed net inflow of Rs 257 crore last month, compared to Rs 360 crore in June.

In addition, investors infused a net sum of Rs 73,964 crore in debt mutual funds in the month under review compared to a net Rs 3,566 crore in June.

Liquid funds attracted the largest chunk of inflow at Rs 31,740 crore, followed by money market funds at Rs 20,910 crore, low duration at Rs 8,161 crore and ultra short at Rs 6,656 crore.

Overall, the mutual fund industry witnessed a net inflow of Rs 1.14 lakh crore across all segments last month, compared to an inflow of Rs 15,320 crore in June.