SIPs continue to boost Mutual Fund inflows in August

Equity mutual funds witnessed strong net inflows of Rs 279.2 billion in August 2023, a significant improvement compared to July’s Rs 100 billion net inflow. This was driven by continued robust flows into small cap, mid cap and multi cap schemes. Meanwhile, systematic investment plan (SIP) contributions hit another record high of Rs 158.1 billion in August.

According to data from the Association of Mutual Funds in India (AMFI), net inflows into equity mutual funds, excluding arbitrage funds, stood at Rs 279.2 billion in August 2023 compared to Rs 100 billion in July 2023. Flows into arbitrage funds, which invest in arbitrage opportunities between the cash and futures segment, came in at Rs 95 billion in August.

Within equity funds, small cap funds saw net inflows accelerate to Rs 42.6 billion in August from Rs 18.4 billion in July. Mid cap funds witnessed net inflows of Rs 25.1 billion compared to marginal outflows of Rs 2 billion in July. Multi cap and flexi cap funds also saw net inflows improve significantly to Rs 56.1 billion in August versus Rs 15.9 billion in the previous month.

After facing relentless redemptions over the past year, large cap funds saw net outflows moderate to just Rs 3.5 billion in August compared to outflows of Rs 18.8 billion in July. The outflows from large cap funds have steadily declined after peaking at Rs 44 billion in May 2023. Improving sentiment towards large caps has aided this trend.

Overall, equity-oriented mutual fund AUM stood at Rs 24.6 trillion as of August 2023, a 23% year-on-year growth compared to August 2022. Equity funds now comprise 53% of the industry’s total AUM of Rs 46.6 trillion. The share of equity funds in total AUM has risen by 182 basis points in the last one year.

Robust SIP Flows Continue

SIP flows stayed strong for the fifth consecutive month, coming in at a record high of Rs 158.1 billion in August. The total SIP book size increased to Rs 8.5 trillion, rising 32% year-on-year and 2% month-on-month. The number of new SIPs registered in August stood at 3.6 million while 1.96 million SIPs were discontinued. Net new SIP registration was 1.63 million in the month.

The resilient SIP flows highlight the maturity of mutual fund investors who continue to stay invested despite near-term volatility in equity markets. SIP contributes around 40% of net inflows for the mutual fund industry currently.

Debt, Liquid Funds See Outflows in August

Debt funds (excluding liquid funds) saw outflows of Rs 39.8 billion in August compared to inflows of Rs 113.4 billion in the previous month. Liquid funds witnessed outflows accelerating to Rs 235 billion in August versus net inflows of Rs 498 billion in July.

Rising bond yields and expectations of further rate hikes by the RBI led to redemptions from debt funds. Liquid funds are seeing outflows as corporates redeem investments to meet advance tax payment obligations.

In terms of assets under management, liquid funds’ AUM declined 3% month-on-month to Rs 6.8 trillion while debt funds’ AUM was up 1% to Rs 7.4 trillion in August 2023.

ETFs, Index Funds See Inflows

Index funds and ETFs saw net inflows improve to Rs 45.4 billion in August compared to Rs 8.6 billion in July. Investors continue to take the passive investing route amid significant volatility in active funds over the past year. The AUM of ETFs and index funds put together currently stands around Rs 4 trillion.

HDFC AMC, SBI AMC Gain Equity AUM Market Share

HDFC AMC and SBI AMC gained equity AUM market share in August 2023 compared to last year. HDFC AMC’s market share rose by 102 basis points to 12.6% while that of SBI AMC increased by 102 basis points to 13.7%.

Nippon India AMC and ICICI Prudential AMC also improved their equity AUM market share by 31 basis points and 40 basis points respectively over the last one year.

In contrast, market share of Birla Sun Life AMC and UTI AMC declined 78 basis points and 48 basis points respectively during the same period.

In the debt fund segment, SBI AMC, ICICI Prudential AMC and Nippon India AMC gained market share while HDFC AMC and UTI AMC lost share over the past one year.

Strong Equity Flows in 2023 So Far Despite Volatility

Despite heightened volatility and correction in equity markets in 2023 so far, mutual fund investors have continued to invest in equity funds. Net inflows into equity funds have totalled Rs 582 billion in the first eight months of 2023. Though lower than same period last year’s inflows, it highlights the maturity of investors.

Within equity, small cap funds have seen net inflows of Rs 86 billion year-to-date while multi cap funds witnessed Rs 62 billion net inflows. Large cap funds saw outflows moderate to Rs 97 billion.

Arbitrage funds saw net inflows of Rs 166 billion in 2023 so far. These schemes generate returns by exploiting price differentials in the cash and derivatives market segments.

On the fixed income side, liquid funds witnessed net outflows of Rs 1.2 trillion between January to August 2023. Debt funds saw net outflows of Rs 18 billion during the same period compared to net inflows of Rs 1.4 trillion last year.

Rising bond yields on the back of monetary tightening by the RBI makes existing bond investments lose value, leading to redemptions by debt fund investors.

SIP flows have remained robust in 2023 as well, totalling Rs 1.1 trillion in the first eight months. The pace of new SIP registrations has also remained strong.

The steady equity inflows highlight maturity of investors who look at market corrections as an opportunity to increase investments. It also indicates their preference for mutual funds as a long-term wealth creation avenue. The SIP book providing stability to flows has been a positive factor.