Five highlights for equity markets from AMFI's latest data

AUM of Equity mutual funds crossed the Rs 30 lakh crore mark in August, with an increase of Rs 75,055 crore. As per the latest numbers, open-ended equity mutual fund inflows rose 3.03 percent to Rs 38,239.16 crore during August driven by inflows across equity categories.

In August 2024, as per Association of Mutual Funds in India (AMFI) data, the industry continued to see a steady rise in assets under management (AUM) even as the market continued to face volatility and concerns on valuations. For August, total AUM saw a 2.7 percent rise to Rs 66.7 lakh crore, compared to Rs 64.97 lakh crore in July.

In August, according to AMFI, a total of 18 schemes were launched, raising a total of Rs 13,815 crore.

Commenting on the continued inflows despite the volatility, Himanshu Srivastava, associate director, manager research, Morningstar Investment Research India, said that challenging markets are actually a good time to invest, adding that domestic investors have shown resilience.

"Investors are capitalising on the opportunities the market is offering. It's encouraging to see investors using mutual funds instead of going directly into the market without proper research," Srivastava said.

Here are some of the key highlights from this month.

AUM on the rise

AUM growth, according to AMFI, was driven primarily by inflows across various open-ended categories. Net cash inflows for the month stood at Rs 1.08 lakh crore, with equities accounting for Rs 38,239 crore, debt funds Rs 45,169 crore, hybrid funds Rs 10,005 crore and other categories Rs 14,599 crore.

In a media comment, Venkat Chalasani, the AMFI CEO, said, “The positive inflow, along with folio count surpassing 20 crore, reflect investor confidence and a growing appreciation for mutual funds as a preferred investment avenue." He added that as mutual funds remain a key stabilising factor for the equity market in India, their commitment towards transparency and excellence remains resolute.

A Rs 75,055 crore jump in allocations took AUM of equity mutual funds past the Rs 30 lakh crore mark in August. As per the latest numbers, open-ended equity mutual fund inflows rose 3.03 percent to Rs 38,239.16 crore during August, driven by inflows across equity categories.

Large-cap funds gain

While equity funds saw a rise in inflows, the large-cap category did particularly well, with Rs 2,636.86 crore coming in during August, a healthy 293 percent higher than in July.

Srivastava suggested that this shift could reflect concerns about the overvaluation of the mid- and small-cap segments. "Large-cap funds are often seen as stabilisers during volatile times, offering stability and credibility that smaller-caps cannot match. While small-caps can deliver high returns during exuberant markets, they are more volatile, making large-cap investments more appealing in uncertain market conditions," he noted.

Manish Mehta, national head, sales, marketing and digital business, Kotak Mutual Fund, attributed large-caps' appeal to better valuations as well as communication with investors and distributors.

"It's only after repeated communication that we began seeing mid- and small-cap flows slow down over the past few months," Mehta said, adding that the mid- and small-cap segments have been considered overvalued for some time but investor action typically lags. Now, large-cap funds are gaining momentum as investors seek stability.

Deepak Ramaraju, senior fund manager at Shriram Asset Management Company, said that another reason could be a catch-up in the valuation gap between large-, mid- and small-caps.

Inflows into small-cap funds grew 52 percent to Rs 3,209.33 crore while mid-cap funds grew 86 percent to Rs 3,054.68 crore in August compared with the figures for July. In the case of multi-cap funds, the inflows fell 65 percent to Rs 2,475.06 crore.

Sectoral and thematic funds remained attractive

In August, sectoral and thematic funds saw an inflow of Rs 18,117 crore of which five new funds in the category collected Rs 10,202 crore. Most market experts see a sustained demand and expect the trend to continue for some time. According to Ramaraju, the slight decline could indicate that there are many me-too kinds of products flooding the markets. “However, the segment continues to see inflow due to the launch of NFO and push strategies. There is also a rotation of investments from one segment to another,” Ramaraju said.

SIPs continue to gain

For August, systematic investment plans (SIPs) hit a record high inflow of Rs 23,547 crore, with the total corpus standing at Rs 13.39 lakh crore, accounting for nearly 20 percent of the total portfolio, according to AMFI. In July 2024, money coming via SIPs was around Rs 23,332 crore. Akhil Chaturvedi, executive director and chief business officer, Motilal Oswal AMC, noted that SIPs grow about 1 percent every month. “This is very healthy for long-term growth of the industry and investors to increase their equity allocation in a disciplined way,” he said.

Gold ETFs continue to find takers

In the passive segment, gold exchange-traded funds (ETFs) saw net inflows of Rs 1,611.38 crore, a 20 percent rise over the previous month. Srivastava noted that the surge was partly fuelled by a correction in gold prices in August, which prompted increased buying activity. Additionally, global inflationary pressures and uncertainties around interest rate cuts reinforced gold's status as a safe haven. “With the anticipation of a potential interest rate cut by the US Federal Reserve in their upcoming September policy meeting, the impact on gold prices remains to be seen. Over the years, gold has also been recognised as an effective portfolio diversifier, leading many investors to incorporate gold ETFs into their investment portfolios,” Srivastava added.