Investors continue to back-up equity mutual funds in June as such schemes attracted a net inflow of Rs 15,498 crore on strong flows from systematic investment plans despite volatility in the stock market and relentless selling by Foreign Portfolio Investors (FPIs).
This also marked the 16th straight month of positive inflow in equity schemes.
Inflows into equity mutual funds in June was lower compared to the net inflow of Rs 18,529 crore seen in May, data from the Association of Mutual Funds in India (AMFI) showed on Friday.
Kavitha Krishnan, Senior Analyst - Manager Research, Morningstar India, believes that continuous FPIs selling impacted the magnitude of flows on the back of concerns over a global recession, the upcoming US midterm elections, and their focus on regulating inflation.
Equity schemes have been witnessing net inflow since March 2021, highlighting the positive sentiment among investors.
Prior to this, such schemes had consistently witnessed outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.
All the equity-oriented categories received net inflows in June with the Flexi-cap Funds category being the biggest beneficiary with a net inflow of Rs 2,512 crore.
This was followed by the multi-cap fund that witnessed Rs 2,130 crore net infusion.
This positivity is in spite of the capital markets regulator Sebi's ban on launch of new mutual fund schemes during the June quarter.
"The decline in the prices of bitcoins and Ethereum, a relatively lower return offered in other traditional investment products and an increased awareness towards long-term investing among investors has likely led to continued flows," Morningstar India's Krishnan said.
According to Gopal Kavalireddi, Head of Research at FYERS, "Even with high volatility and extended consolidation in the Indian equity markets, investors continue to take active participation through mutual funds - active and passive alike."
The latest inflow comes at a time when the domestic equity market is reeling under severe pressure.
Besides foreign investors dumped Indian shares worth Rs 50,203 crore in June, making it the worst net outflow in over two years, on aggressive rate hike by the US Federal Reserve and elevated inflation.
This also marked the ninth consecutive monthly withdrawal by FPIs.
Inflows through SIPs were at Rs 12,276 crore in June as compared to Rs 12,286 crore in May.
Besides, the number of SIP accounts reached an all-time high at 5.54 crore in June.
Akhil Chaturvedi, chief business officer, Motilal Oswal AMC, said the SIP figure indicates better awareness among retail investors about long-term orientation of equity investments and understanding of current volatility as a part and parcel of equity investing.
"Strong momentum towards the big megatrend of financialization of savings being observed across the country continues to remain intact, even on the backdrop of subdued macro-economic situation, both domestically and globally.
"Rising interest rates globally, weakening Rupee, mixed start to monsoon in India and rising retail inflation in India and globally too, has not deterred small savers from continuing to patronize SIP mode of savings," NS Venkatesh, chief executive, AMFI, said.
He, further, said positive flows in retail MF schemes at current levels will continue in CY2022.
"Funds mobilised under retail schemes stood at Rs 40,838 crore outweighing redemptions which stood at Rs 27,500 crore during June 30, 2022," AMFI said.
Apart from equity, Gold exchange traded funds (ETFs) experienced a net inflow of Rs 135 crore in the month under review.
During the month, index funds and other ETFs combined received net inflows of Rs 12,660 crore as passively managed funds have gained prominence amongst investors over recent times, and they have been actively adding these funds in their portfolio from a diversification perspective.
However, redemptions from debt mutual funds were at a higher level, with a net outflow of Rs 92,247 crore in June, as compared to a net withdrawal of Rs 32,722 crore in the preceding month.
The negative flow in debt schemes could be attributed to quarter-end phenomena, whereby corporate redeem their debt investments for advance tax payments and banks wanting to avoid capital charge enforced by RBI, Venkatesh said, adding, hopefully July and August would see a different picture on debt schemes flows.
Overall, the mutual fund industry registered a net outflow of Rs 69,853 crore last month, as compared to a net pull out of Rs 7,532 crore in May.
The outflow pulled down the average assets under management (AUM) of the industry to Rs 36.98 lakh crore at the end of June, from Rs 37.37 lakh crore at May-end.