A substantial increase in inflows into India’s equity mutual funds was recorded in August – a trend that has been on the rise for the past 30 consecutive months.
This preference for mutual funds, particularly in the small- and mid-cap segments, is driven by the expectation of strong returns, according to Association of Mutual Funds in India (AMFI) data quoted in a Reuters report.
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The data reveals that equity mutual funds experienced a significant sequential increase in inflows, reaching Rs 20,245 crore in August, up from Rs 7626 crore in July.
Interestingly, this surge in mutual fund investments coincided with a 2.53 per cent decline in the benchmark Nifty 50 index, marking the end of a five-month winning streak.
However, this dip was overshadowed by a 3.70 per cent rise in the Nifty mid-cap 100 and a 4.62 per cent increase in the Nifty small-cap 100 during the same month.
Small-cap funds have been particularly favored, attracting the majority of investments for the 11th consecutive month, amounting to Rs 4,265 billion rupees.
Conversely, large-cap funds witnessed outflows of Rs 349 crore. Mid-cap funds also saw a healthy influx of Rs 2,512 crore from retail investors in August.
“The interest in small-cap and mid-cap equity mutual funds comes after sharp correction in the broader markets over the last two years, aided by strong macroeconomic fundamentals,” said NS Venkatesh, chief executive of AMFI.
In 2023, small-cap stocks have surged by 33.5 per cent, while mid-cap stocks have recorded a 31.2 per cent increase, significantly outperforming the Nifty 50 index, which saw a modest 10 per cent gain.
Furthermore, systematic investment plans (SIPs) have gained popularity, reaching a record high of Rs 15,814 crore in August. This coincided with the opening of 35.9 lakh new SIP accounts, setting a new record.
This surge in mutual fund investments contrasts with the moderation observed in foreign portfolio investors (FPIs) buying domestic equities.