Inflows into equity mutual funds dropped sharply by 40 per cent to Rs 5,988 crore in June on profit booking by investors as stock markets witnessed sharp rallies in recent times.
In comparison, the equity mutual funds saw a net inflow to the tune of Rs 10,083 crore in May, the highest fund infusion in 14 months, data from the Association of Mutual Funds in India showed on Thursday.
Equity schemes saw a net inflow of Rs 3,437 crore in April and Rs 9,115 crore in March. Prior to this, equity schemes had consistenly witnessed outflows for eight straight months from July 2020 to February 2021.
"With net inflows in March, April, May and now in June, clearly investors are gaining their conviction back on the equity markets," Himanshu Srivastava, associate director – manager research at Morningstar India, said.
"However, the lower quantum of net inflow compared to May could also be attributed to profit booking by investors with equity markets witnessing sharp rally in the recent times," he added.
As per the data, inflows into equity and equity-linked open ended schemes was at Rs 5,988.17 crore in June.
"Investors continue to invest in pure equity schemes resulting in positive net sales of almost Rs 6,000 crore, this is slightly lower than last month due to higher redemptions.
"For now, the trend surely is in favour of Indian equities by domestic investors," Akhil Chaturvedi, associate director, head of sales & distribution at Motilal Oswal Asset Management Company, said.
AMFI chief executive N S Venkatesh too attributed the decline in inflow in June to profit booking by investors.
Barring Equity Linked Saving Schemes (ELSS) and value funds, which saw withdrawal to the tune of Rs 792 crore and Rs 115 crore respectively, all the equity schemes witnessed inflows last month.
Riding on the recent market rally, Mid Cap Fund category attracted significant investments to emerge as the biggest beneficiary during the month as it received a net inflow of Rs 1,729 crore.
This was followed by sector/thematic funds which saw inflows of Rs 1,207 crore.
Flexi Cap Funds, with their fluid investment approach that enables them to benefit from investment opportunities across market segments, also attracted Rs 1,087 crore from investors.
Apart from equities, investors put in Rs 12,361 crore in hybrid funds in the month under review.
This included Rs 9,060 crore in arbitrage funds.
Further, Gold Exchange Traded Funds (ETFs) witnessed a net inflow of about Rs 360 crore last month compared to Rs 288 crore in May.
In addition, investors infused Rs 3,566 crore in debt mutual funds last month after pulling out Rs 44,512 crore in May.
It was a mixed bag for the segment with categories such as Money Market Fund, Ultra Short Duration Fund, Short Duration Fund and Gilt Fund witnessing significant net outflows whereas categories such as Floater Fund, Low Duration Fund, Overnight Fund and Liquid Fund received good net inflows.
Within the debt segment, floater funds attracted Rs 6,319 crore.
Besides, investors continued their affinity with Low Duration Funds as they invested Rs 6,273 crore in such funds.
"Floater funds continue to receive net positive flows given the limited probability of interest moving down significantly," Srivastava said.
Money Market Fund, which witnessed good net inflows in April and May, was the worst hit during the month with investors pulling out Rs 13,988 crore.
The relatively low returns from the category in the last one year could be the reason for the same, he added.
Overall, the mutual fund industry witnessed a net inflow of Rs 15,320 crore across all segments during the period under review compared to an outflow of Rs 38,602 crore in May.
The Assets Under Management (AUM) of the mutual fund industry rose to an all-time high of Rs 33.67 lakh crore at the end of June from Rs 33 lakh crore at the end of May.