Even as the stock markets hit the record highs, the mutual fund (MF) sector reported a decline in inflows into equity and the debt schemes while balanced advantage funds mobilised a higher amount through new fund offers (NFOs). While the funds mobilised via SIPs hit a new high of Rs 9,923 crore and folios under retail schemes shot to a peak of 8.95 crore, investors pumped in a net Rs 8,666 crore into equity mutual fund schemes in August, lower than the Rs 22,583 crore invested in July.

However, the balanced advantage category continued to attract big inflows, as it saw net inflow worth Rs 16,570.97 crore last month , as per Association of Mutual Funds in India (AMFI). Flexi cap funds saw inflows of Rs 4,741 crore, followed by focused funds. On the other hand, ELSS and value funds saw outflows. New fund offers continued to attract big money from retail investors and mobilised Rs 23,668 crore in August. Debt MF schemes saw net inflows worth Rs 1,074 crore in August, The number was much higher at Rs 73,694.04 crore in July.

Similar to last month’s trends, floater funds attracted the biggest investment. However, overnight and low duration funds saw big withdrawals of Rs 11,807 crore and Rs 7,407 crore respectively.
AMFI Chief Executive N S Venkatesh said, “Overall positive flows into open-ended MF schemes and all-time high market indices helped Indian MF industry’s net assets under management (AUMs) to breach record Rs 36 lakh crore milestone in August 2021.”

According to him, retail assets were at Rs 17.15 lakh crore, almost half of total Industry AUMs. SIP AUMs hit a record high of Rs 5.26 lakh crore, which now forms a third of retail AUM. On the other hand, there has been a healthy rise in SIP accounts to a record 4.32 crores and monthly SIP contribution at an all-time high of Rs 9,923 crore, reflecting the rising retail preference towards mutual funds as a long-term wealth creation avenue, he said.

“Continued robust month on month fund mobilization in arbitrage and dynamic asset allocation schemes and affinity towards thematic and sectoral and diversified Flexicap schemes since the start of the new fiscal FY22, including SIPs has over-shadowed profit-booking during the last few months,” Venkatesh added.

Aashish Somaiyaa, CEO, White Oak Capital, said, “A granular look at the data of equity and balanced/balanced advantage category of schemes suggests that the gross flow, the redemption and the net flow for the months of July and August remains to be at the same elevated level. But there is a significant shrinkage in the net flow for equity category and corresponding bump up in net inflow of the balanced advantage category.”

This leads one to believe that at the aggregate industry level, large balanced advantage NFO has garnered a lot of traction by way of switches from equity to balanced advantage category. From a retail investors’ perspective in the short term, it may not be a bad development given elevated market levels and generally lower risk perception of balanced advantage funds, he added.

“August saw continued flows in floating rate category in fixed income with net sales of nearly Rs 10,000 crore. Anticipation of tighter liquidity conditions due to RBI announcement of additional VRRR could have prompted this move. Categories like medium to long term and gilt also saw positive net sales as the steep yield curve offers cushion to any potential abrupt rise in rates,” said Lakshmi Iyer, chief investment officer (debt) & head—products, Kotak Mahindra Asset Management Company.
At Rs 36.59 lakh crore, the net AUMs for the Indian MF industry breached the Rs 36-lakh crore landmark for the first time.

“At 10.85 crore folios, the MF industry has added a whopping over 80 lakh folios for the first time ever, within short period of five months in FY22. To put into perspective, this meteoric rise in the first 5 months of FY22, the MF industry added just 74 lakh folios in FY21, between April 2020 to March 2021,” another analyst said.

“This trend is also getting reflected in the record NFO collections. The decline of the second wave, increase in vaccinations, sharp equity rally in the recent past, and the stability of the markets despite the second wave have added to investor comfort and confidence,” said Arun Kumar, head of research, FundsIndia.

Folios under retail schemes, at 8.95 crore, are also at an all-time high, with a massive 78 lakh retail folios being added in the first five months of FY22 versus 18 lakh folios in FY21.
According to AMFI data, new SIPs registered during August 2021 at 24.92 lakh is the highest ever registration and has led to the MF industry reporting a record high 4.32 crore SIP accounts. In August 2020, SIP accounts stood at 3.30 crore. In the past one year, SIP accounts have risen by over 1.02 crore. Retail AUM now forms 46.87 per cent of total industry AUM at Rs 36.59 lakh crore.