For a second straight month, net inflows into equity mutual fund (MF) schemes remained aboveRs 10,000 crore, taking the year to date net inflow toRs 83,469 crore (over $13 billion). The huge inflows give domestic MFs more might than foreign institutional investors (FIIs).
"Indian equity markets have seen unprecedented literacy and continuous inflows. This has resulted in domestic funds acting as an insulator to global volatility. The equity investment cult in India is developing rapidly and that is seen in the monthly inflows," said Motilal Oswal, CMD, Motilal Oswal Financial Services.
According to the Association of Mutual Funds of India (Amfi), equity-oriented MFs received net investor flows ofRs 10,739 crore in May, a bit less thanRs 10,880 crore in April.
The surge in flows is against the backdrop of stock markets climbing to record highs and signal investors' confidence in the rally. After a sharp 17 per cent rally in 2017, the benchmark Sensex is at 31,000. The 50-share Nifty is trading close to 9,700.
MFs have put to use only a fraction of inflows they have received. So far in 2017, MFs have bought shares worthRs 33,000 crore (around $5.2 billion). On the other hand, FIIs have pumped in around $8 billion.
Industry players say strong monthly inflows are thanks to consistent flows through systematic investment plans (SIPs).
"The spread of awareness about mutual funds and SIPs, in particular, has helped the sector draw more investors. Over the last few years, awareness about mutual funds has grown tremendously. There is a further potential to grow," said Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon Mutual Fund.
Net inflows through SIP are betweenRs 4,500 crore andRs 5,500 crore a month, say industry players. This is a significant improvement as the average monthly SIP amount had dropped toRs 800 crore following the global financial crisis in 2008. "The strong equity inflows are mainly retail money. Investors are now better informed than they were 10 years ago. Market levels are not bothering investors as increasingly inflows are long-term in nature," said G Pradeepkumar, CEO of Union Mutual Fund.
The total assets under management (AUM) of the industry stood atRs 19.03 lakh crore in May againstRs 19.26 lakh crore in April. The overall net inflows slipped into negative territory atRs 40,711 crore mainly on the back of a pullback in liquid and money market schemes. All other categories, barring gold ETFs, witnessed positive net inflows.
Balanced funds, which invest in a mix of debt and equity, garneredRs 7,663 crore in May. The AUM of balanced funds has crossedRs 1 lakh crore, up fromRs 45,000 crore a year ago.
On the equity front, including 65 per cent of balanced funds, the total assets stood atRs 6.5 lakh crore in May againstRs 4.42 lakh crore a year ago.