Equity MF inflows hit a near 2-year high in January, SIPs at record ₹18,839 crore

Mumbai: Inflows into equity mutual funds hit a 22-month high in January, led by sustained investments in sectoral, small- and mid-cap funds. Large-cap funds also performed well, with inflows at an 18-month high.

Net equity mutual fund inflows rose 28% sequentially to ₹21,780.56 crore in January, the highest since March 2022, according to data from the Association of Mutual Funds in India (Amfi) on Thursday.

The equity segment was also aided by three new fund launches in January which together garnered ₹967 crore.

“…it is abundantly clear that we are in an era of growth and participation through financial savings instruments. The surge in SIP accounts to an unprecedented 79.20 million in January 2024, coupled with the milestone of 5.18 million new SIP registrations, underscores the unwavering commitment of investors towards disciplined wealth creation," said Venkat Chalasani, chief executive, Amfi. 

The mutual fund industry's assets under management (AUM) reached an impressive ₹52.74 trillion, up from ₹50.77 trillion in December, showcasing the industry's robust appeal and resilience. January also marked the 35th consecutive month of inflows.

Despite valuation concerns, small and mid-cap funds continued to attract robust inflows.

Mid-cap funds inflows rose 48% month-on-month in January to ₹2,061.18 crore, and while small-cap funds saw ₹3,256.9 crore of net flows for the fourth consecutive month, the quantum fell ₹600 crore sequentially.

“Both the mid-cap and the small-cap indexes have seen a sharp rally over the last six months and one year. Consequently, investors have also flocked to these categories with ever increasing flows,” said Melvyn Santarita, analyst, Morningstar Investment Research India Pvt Ltd.

Santarita, however, cautioned investors against the volatility in these segments, recommending a long-term perspective and the Systematic Investment Plan (SIP) route for mitigating risks and leveraging dollar-cost averaging.

January was a choppy month for Indian stock markets, with the benchmark Nifty50 ending the month marginally lower. Small-cap and mid-cap indices, however, bucked the trend and delivered positive returns. The Nifty Smallcap 250 index surged 6.6%, while the Nifty Midcap rose nearly 4%, showcasing the resilience of these segments compared to the broader market.

Interestingly, inflows into large-cap funds were at ₹1,287 crore, the highest in 19 months, and followed a ₹281 crore outflow in December.

Debt funds also witnessed a revival, after two consecutive months of outflows, securing ₹76,469 crore in January. The segment had witnessed a net outflow of ₹75,560 crore in December and ₹4,707 crore in November.

Flows into debt funds were driven by the liquid fund category, which recorded the highest net inflows of ₹49,468 crore, followed by money market funds at ₹10,651 crore and overnight funds at ₹8,995.

“After witnessing an outflow of ₹39,675 crore from liquid funds in the previous month due to advance tax payments and periodic redemptions, January inflows were positive, with an inflow of ₹49,468 crore," said Gopal Kavalireddi, vice president, research, at FYERS, an online trading and investment platform.

Part of the sectoral flows of ₹4,804.7 went into the PSU and infrastructure stocks. Hybrid funds attracted net inflows of ₹20,637 crore, thanks to flows into arbitrage funds hitting around ₹10,608.39 crore.

Mutual fund folios touched a historic high of 169.5 million in January, with retail MF folios, encompassing equity, hybrid, and solution-oriented schemes, also peaking at 135.68 million.

Monthly SIP contributions were also at an all-time high of ₹18,838 crore, up from December's ₹17,610 crore.