Home / Mutual Funds / Equity mutual fund inflows decline to 10-month low of 6,120 crore in August
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Inflows in open-ended equity mutual funds dropped for the third straight month in August to 6,119.58 crore, as investors continued to pull out money due to rising interest rates and sticky inflation.

Despite the fall, net inflows in equity funds were in positive zone for the 18th month. In July equity funds saw inflow of 8,898 crore, 15,498 crore in June, 18,529 crore in May and 15,890 crore in April.

Retail participation through systematic investment plans (SIPs) remained robust despite the volatility in the market.

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inflows ebb

Data from the Association of Mutual Funds in India (Amfi), on Friday showed monthly SIP contribution in August stood at 12,693.45 crore, an all-time high. Number of SIP accounts were also at record high of 57.1 million in August, exceeding June’s 56.1 million. “Monthly SIP, SIP AUM, SIP folios, overall mutual fund folios, AUMs, are at an all-time high, coupled with continued positive flows in most categories of mutual fund schemes, signify rising informed investment preference towards the mutual fund asset class," N.S. Venkatesh, chief executive, Amfi, said.

Flexi-cap funds witnessed a significant inflow of 2,099 crore, followed by mid-cap and small-cap funds.

In the hybrid category, barring arbitrage funds, the five remaining schemes, including dynamic asset allocation, balanced advantage funds, balanced hybrid and aggressive hybrid funds witnessed positive flows. “Investors had cautious approach this month and money is temporarily shifting from equity to debt considering the rising interest rate scenario," Priya Agrawal, money coach, LXME, said.

Debt mutual funds saw net inflows of 49,164 crore, led by liquid funds at 50,095 crore. However, overnight, floater, and banking and PSU funds saw outflows of 16,405 crore, 2,285 crore and 1,380 crore, respectively.

Due to strong demand in the debt market, the mutual fund industry saw net inflow of over 65,000 crore in August. Consequently, the industry’s net assets under management hit an all-time high of 39.33 trillion, up 7% over last year.

In view of the rate hike cycle moving northwards, a majority of investors chose to remain invested in shorter-duration funds. “Investors have been parking their money in short-term debt instruments, against long-term instruments owing to multiple reasons. Considering the interest rate is on an upward trajectory, investors prefer to park their money in these short-term instruments considering that they are likely to earn a higher rate of interest compared to other traditional assets like fixed deposits," said Kavitha Krishnan, senior analyst, manager research, Morningstar India.

According to the data, gold exchange-traded funds (ETFs) continued to see net outflows of 38.14 crore, while other ETFs saw inflows of 7,416.46 crore. August also saw a dip in the number of folios with gold ETFs from 4.64 million in July to 4.61 million. “As high interest rates impacted gold prices, investors preferred to put their money in equity and short-term debt as opposed to gold. This trend has been witnessed globally, too," said Krishnan.

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