Equity mutual fund inflows slump over 40% in July but passive schemes defy slowdown

India’s equity mutual funds have had a torrid July, or at least that is what the latest data seems to suggest.

Latest figures revealed by the Association of Mutual Funds in India (AMFI) show that investments into open-ended mutual funds fell by as much as 43% on a sequential basis, in July, to Rs 8,898.25 crore.

Why was there such a steep decline in inflows?

One major reason for the decline was the persistent volatility in the stock market as concerns over inflation and the rising interest rates grew.

For how many straight months have inflows been falling?

Inflows have been falling for three months now. To be sure though, July was the 17th straight month for which inflows were net positive.

So, what do the figures actually show?

AMFI data shows that net inflows comprising debt and equity segments were positive at Rs 28,098.89 crore, as against net outflows of Rs 69,853 crore in June.

The data also showed that the number of systematic investment plan (SIP) accounts stood at all-time high in July at 5.61 crore, while monthly SIP contribution remained strong at Rs 12,140 crore last month.

Assets under management (AUM) under SIPs at the end of July stood at Rs. 6.09 lakh crore, with new SIPs registered during the month at 17.42 lakh.

How big is the Indian mutual fund market now?

According to the AMFI numbers, the total AUM of the Indian mutual fund industry stands at Rs. 37.74 lakh crore. The figure as of 31 July was 7% higher than the figure in the previous year, on the same date.

Which categories of funds rule the Indian mutual fund industry?

Flexi-cap, large-cap, and large and mid-cap schemes emerged as the top three in net inflows, among equity funds. In the hybrid category, there were positive flows in the dynamic asset allocation, balanced hybrid and aggressive hybrid, balanced advantage fund and multi-asset allocation fund.

On the fixed income, or debt side, overnight fund, ultra-short duration fund and money market fund, long duration fund and gilt fund with 10-year constant duration witnessed positive flows.

Solution-oriented schemes such as retirement and children’s savings funds and index, fund of funds (FoFs) and exchange-traded funds (ETFs) also recorded positive flows during last month.

What more does the data say on net inflows?

As of July, net flows for income/debt schemes stood at Rs 4,930.08 crore. Inflows in solution-oriented schemes was at Rs 110.92 crore. For fund-of-funds investing overseas, net flows stood at Rs. 313.05 crore.

Passive schemes, however, continued to get strong inflows. Index funds received Rs 6,779.23 crore while non-gold ETFs received inflows of Rs 7,635.03 crore.

Data also showed that the number of mutual fund folios as on 31 July rose 29% year-on-year to an all-time high at 13.55 crore compared with 10.54 crore last year. The number of folios grew 1% month-on-month from 13.46 crore.