Inflow in equity mutual funds drops 22% in November; SIP hits fresh high at over Rs 17,000 crore

Inflow in equity mutual funds has dropped by 22 per cent month-on-month to Rs 15,536 crore in November, while small cap funds continue to see traction from investors.

This was way higher than the Rs 19,957 crore inflow seen in the category in October. Before this, the inflow was at Rs 14,091 crore in September, according to the data from the Association of Mutual Funds in India (AMFI) released on Friday.

"Diwali festivities and bank holidays probably affected equity net flows in November," Manish Mehta, Head of Sales, Marketing & Digital Business at Kotak Mutual Fund, said.

The flow in November also marks the 33rd consecutive month of net inflows. All the categories experienced inflow in equity segments. The equity segment was also aided by six new fund launches in November which garnered Rs 1,907 crore.

Despite the decline, inflow through SIPs (Systematic Investment Plans) hit a fresh all-time high of Rs 17,073 crore last month. It continues to attract new investors by increasing awareness of the benefits of the instrument.

"With indices moving from strength to strength, boosted by high economic activity, steady GST collections, and faith in the reforms and policies undertaken by the government, investors continued their allocations into various sectors of the economy. SIP inflows hit an all-time high of Rs 17,073 crore, bettering the Rs 16,928 crore of flows in October," Gopal Kavalireddi, Vice President of Research at FYERS, said.

Within the equity funds, mid and small cap equity funds continue to receive the bulk of the inflows, accounting for 41 per cent out of the total equity inflows.

Small cap funds saw the highest inflows among equity funds at Rs 3,699 crore, trailed by mid-cap funds at Rs 2,666 crore and sector/thematic funds at Rs 1,965 crore. However, fund flows into large caps continue to be tepid, but investors continue to opt for index funds, pouring in Rs 1,353 crore for the month.

Boosted by the benchmark indices hitting all-time highs in November, the assets under management of the 42-player mutual fund industry reached Rs 49.04 lakh crore in November-end from Rs 46.71 lakh crore in October-end.

On the other hand, Rs 4,707 crore were eroded from the debt-oriented categories in November, after registering a net inflow of Rs 42,634 crore in October.

Except for five categories -- money market, long duration, banking and PSU, Gilt and Floater category, all other categories witnessed net outflows.

"Since the revision of tax laws, investments in fixed-income funds have been notably subdued. The uncertainty surrounding interest rates has further complicated investment decisions for investors. Moreover, the robust performance of equity markets has been drawing increased attention from investors," Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India, said.

Categories like long duration and Gilt have been slowly but consistently receiving net flows for a reasonably long time now largely in anticipation of a change in interest rate cycle in future. On the other hand, uncertainty over the timing of interest rate cuts has led few investors to choose money market and floater funds as part of the debt allocation in their portfolio, he added.

Apart from debt funds, the quantum of net flows in Gold ETFs (Exchange Traded Funds) dropped to Rs 333 crore last month from Rs 841 crore it received in October.

With ongoing geo-political tensions and US inflation still higher than the desired number, the appeal of gold as a safe haven and hedge against inflation is expected to continue, Melvyn Santarita, Analyst at Morningstar Investment Research India, said.

Also recently, gold prices in US dollar terms scaled new highs after going past the USD 2,100 per ounce mark. Given this backdrop, there could be some profit booking in the near term. However, with the perceived risks overall, flows could continue to be positive going ahead, he added.