Launch of new funds led to a sharp rise in equity fund inflows in July, show AMFI data

Bond funds have seen a mixed set of response. Net inflows of Rs 73,694 crore were reported in July 2021 compared to Rs 3,566 crore. (Representative image)

Equity funds saw net inflows of Rs 22,583 crore in July compared to Rs 5,988 crore in June 2021, as per figures released by the Association of Mutual Funds in India (AMFI). Four new fund offers of equity funds put together brought in Rs 13,709 crore. This July month’s inflows include Rs 9,808 crore that ICICI Prudential Flexicap Fund, a new fund launched by ICICI Prudential mutual fund, collected. Barring tax saving schemes and value funds which saw net outflows of Rs 511 crore and Rs 462 crore, respectively other equity funds saw net inflows in July 2021. For the fifth month in a row equity funds received net inflows.

Buoyant stock markets have attracted many investors to mutual funds. The assets under management of the mutual fund industry has gone up Rs 35.3 trillion as on July 31, 2021 compared to Rs 33.6 trillion on June 30, 2021, as per AMFI data. Equity funds and bond funds have seen large net inflows (investments exceed redemptions) in July.

“A lot of investors who have accumulated higher savings in the last year due to lower spending and were staying on the sidelines are getting back. The decline of the second wave, strong recent returns from equities, and the stability of the markets despite the second wave have added to investor comfort and confidence,” says Arun Kumar, Head of Research, FundsIndia.

Investors repose faith in SIPs

The number of systematic investment plan (SIP) accounts outstanding stood at 4.17 crore as compared to 4.02 crore in previous month. SIP has been a preferred means of investing in mutual funds, especially in equity funds. The contribution from SIP stood at Rs 9,609 crore in July compared to Rs 9,156 crore in the previous month. This has been the highest SIP contribution so far in mutual funds.

Investors anticipate interest rates to go up

Bond funds have seen a mixed set of response. Net inflows of Rs 73,694 crore were reported in July 2021 compared to Rs 3,566 crore. Liquid funds and Money market funds saw net inflows of Rs 31,739 crore and Rs 20,910 crore, respectively.

However, banking & PSU bond funds and corporate bond funds have seen net outflows of Rs 3,067 crore and 1,427 crore, respectively. These schemes were preferred avenue for investors in the past few years when the interest rates were going down. Medium to long duration funds also saw net outflows of Rs 1,733 crore. Possibility of rise in interest rates has made investors revisit their investments. “Though the Reserve Bank of India has maintained accommodative stance, investors are bit worried inflation. That could be the reason some of them are booking profits,” says N.S. Venkatesh, Chief Executive, AMFI.

Floater funds – one of the preferred avenue in a rising interest rates environment also got good response. These schemes got net inflows of Rs 7,423 crore in July compared to Rs 6,318 crore in previous month.

Hybrid funds that invest in a mix of stocks, bonds and gold saw net inflows of Rs 19,481 crore in July. In the previous months, this number stood at Rs 12,361 crore. Arbitrage funds took a lion’s share in this. Compared to Rs 9,059 crore in inflows in June 2021, these schemes got inflows of Rs 14,924 crore in July 2021.

Exchange traded funds (ETF) investing in gold saw net outflows of Rs 61 crore compared to net inflows of Rs 359 crore.