Equity funds inflows surpass Rs 20,000 crore

Small-cap funds extended their winning streak with net inflows for the 23rd consecutive month, accompanied by growing interest in dynamic asset allocation funds.

Robust performance amidst volatility

In August, equity mutual funds displayed robust performance, attracting inflows totalling Rs 20,245 crore, marking their highest monthly influx in the past five months. Notably, this surge occurred despite broader market indices reporting negative returns for the month. Systematic investment plans (SIPs) contributed significantly, accounting for inflows of Rs 15,813.54 crore.

Small-cap funds lead the surge

Small-cap, sectoral, and multi-cap funds emerged as the primary drivers of this surge in equity fund inflows. Small-cap funds, in particular, garnered investments worth Rs 4,265 crore in August, pushing the CY23 cumulative tally to an impressive Rs 26,305 crore. Remarkable returns delivered by small-cap funds have sustained a continuous inflow streak, now spanning 23 months.

Over the past year, small-cap funds have consistently delivered an average return of 26.06 per cent, fueling substantial investor demand. Meanwhile, the influx into multi-cap funds and thematic funds was significantly bolstered by new fund offerings (NFOs) within these categories. Multi-cap funds and sectoral funds recorded net inflows of Rs 3,422 crore and Rs 4,806 crore, respectively.

In August 2023, when the BSE Sensex index experienced a decline of 2.55 per cent, the BSE Midcap index and BSE Smallcap index posted gains of 2.57 per cent and 6.12 per cent, respectively.

Shift from large-cap to mid- and small-cap funds

Conversely, large-cap funds continued to experience net outflows amounting to Rs 349 crore in August. This could be attributed to investors seeking higher returns by shifting their focus to mid-cap and small-cap funds. Additionally, debt funds saw net outflows totalling Rs 25,872 crore during the same month.

Dynamic asset allocation funds gain traction

In contrast, dynamic asset allocation or balanced advantage funds attracted inflows of Rs 3,616 crore in August, marking their highest monthly inflow in 20 months. This uptick suggests that some investors may be adopting a cautious approach due to the elevated valuations observed in the equity markets.

In summary, the mutual fund industry experienced net inflows of Rs 14,385 crore in August, while the total net assets under management (AUM) reached Rs 46.63 lakh crore.

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