Net inflows into equity mutual fund schemes declined 14 per cent month-on-month (MoM) in October as smallcap and midcap fund investments cooled after an investment spree that drove flows to new highs in the previous months.
Net inflows last month, at ₹32,994 crore, were lower despite a moderation in redemptions. Gross investments were down 12 per cent MoM at ₹65,581 crore, while redemptions declined 10 per cent to ₹32,588 crore, according to the latest data released by the Association of Mutual Funds in India (Amfi).
MF officials and experts attributed the decline in inflows to profit booking and a change in approach towards smallcap and midcap funds after a sharp run-up.
“October numbers were lower than the previous month by about 14 per cent. A rising market may have led to investors booking profits,” said Manish Mehta, chief business officer, SBI Mutual Fund.
Smallcap and midcap funds, which were leading the inflow charts in the previous two months, witnessed a sharp drop in inflows in October. Together, they garnered ₹11,301 crore last month, down 33 per cent from a record high of ₹16,874 crore in September.
“Together, these two categories accounted for approximately 34 per cent of total net equity inflows, compared with 44 per cent in September. The moderation could indicate some degree of caution among investors towards these segments, particularly given the elevated valuations in certain pockets of the broader market. However, the continued healthy inflows suggest that investors remain constructive on their long-term growth prospects despite near-term uncertainties,” said Himanshu Srivastava, principal, manager research, Morningstar Investment Research India.
Large & midcap funds stood out last month as net inflows nearly doubled to ₹8,484 crore.
Suranjana Borthakhur, head of distribution & strategic alliances at Mirae Asset Investment Managers (India), attributed the sharp rise to diversification by investors.
“Investors appear to be spreading their allocations across categories rather than concentrating in one segment, which is a healthy sign,” she said.
The decline in equity investments was also reflected in the systematic investment plan (SIP) data. The channel brought in ₹32,160 crore last month, compared with ₹32,490 crore in September. Amfi attributed the decline to a marginal drop in contributing SIP accounts and the last day of the previous month falling on a weekend.
Overall, largely supported by ₹1.1 trillion in inflows into debt funds, the industry garnered net inflows of ₹1.7 trillion in October.
“The MF industry recorded net inflows of ₹1.74 trillion in October, taking the assets under management to ₹83.39 trillion, up 0.9 per cent month on month. The industry added a net 1.58 million folios, taking the total to 287.8 million. Equity mutual funds received net inflows of ₹32,994 crore, marking the 68th consecutive month of positive net flows,” said Venkat Chalasani, chief executive, Amfi.
