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Net inflow into equity mutual fund (MF) schemes was significantly lower in August than the record flows in July, showed data released by the Association of Mutual Funds in India (Amfi) on Wednesday. Equity MFs also faced rising redemption pressure, according to the data.

Equity schemes received net inflow of 8,056.80 crore in August, down 61.15% from 20,742.77 crore in July. However, this was the sixth consecutive month of positive inflow into such schemes.

As capital markets hit record highs in August, investors withdrew funds in the month, leading to higher redemptions, said experts. Net redemptions in equity schemes were 23,144.89 crore in August, rising from 17,831.65 crore in July.

Shrinking investment
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Shrinking investment

There is a significant shrinkage in the net flow for equity category and corresponding bump up in net inflow of the balanced advantage category, said Aashish Somaiyaa, chief executive officer, White Oak Capital.

“This leads one to believe that on aggregate industry level large balanced advantage new fund offer (NFO) has garnered a lot of traction by way of switches from equity to balanced advantage category. From a retail investors’ perspective, in the short term it may not be a bad development given elevated market levels and generally lower risk perception of balanced advantage funds," he contended.

The decline on a month-on-month basis in equity MFs could be attributed to profit booking, specifically in some mid- and small-caps, said Mohit Nigam, head of portfolio management services at Hem Securities.

In August, domestic institutional investors (DIIs) including mutual funds, insurance companies, banks and pension funds invested as much as 6,894.69 crore in equities, much lower than the 18,393.92 crore invested in the previous month.

NFOs contributed 23,668 crore to all categories of funds in August while a month ago, NFO collections stood at 17,332 crore. However, SBI Balanced Advantage Fund, which was launched in August garnering a sum of 14,551 crore, was a hybrid scheme with allocations to both equity and debt. In July, ICICI Prudential Flexicap Fund, an equity scheme, mobilized 9,808 crore.

Monthly systematic investment plan (SIP) contributions climbed to a record high of 9,923.15 crore in August. This compares with SIP inflows of 9,608.86 crore in the previous month. Around 2.5 million new SIPs accounts were registered in August, the highest ever monthly registrations, to reach a record high of 43.2 million SIP accounts. In August 2020, there were 33 million SIP accounts.

“Overall positive flows in the open-ended MF schemes and market indices touching all-time highs, helped the Indian MF industry net assets under management to hit a record 36 trillion in August. Continued robust month-on-month fund mobilization in arbitrage and dynamic asset allocation schemes and affinity towards thematic/sectoral and diversified flexicap schemes since the start of the new fiscal FY22, including through SIPs, has overshadowed profit-booking during the last few months," said N.S. Venkatesh, chief executive officer, Amfi.

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