Unperturbed by record market levels, domestic investors poured in a whopping Rs 12,727 crore into equity mutual funds (MF) in July. This is the second-highest ever monthly inflow recorded by the industry. The average monthly inflows seen by equity schemes in the first half of 2017 are Rs 8,000 crore. For the first time, the benchmark Sensex and Nifty had topped the 32,000 and 10,000 levels, respectively last month.
Market experts said strong inflows into MFs will help support the rally, even as valuations remain above long-term averages.
If inflows into balanced funds, which typically invest 65 per cent in equity and rest in debt, are to be considered, the July inflow tally soars to Rs 17,000 crore. The highest monthly inflow of Rs 13,678 crore was in January 2008, the peak of the previous bull market.
"These days, high inflows are not the function of levels of indices, but the increasing understanding about financial investments among Indians. The quality of money pouring in has improved as most of it is coming through systematic investment plan (SIP) unlike the lump sum investment witnessed during 2007-08. Going forward, we will see further high inflows as equity is emerging as one of the most attractive proposition among investors," says Sundeep Sikka, chief executive of Reliance Nippon Mutual Fund.
The mutual fund industry has over 14.5 million SIP accounts, which help the industry with sticky and consistent flows. The average monthly inflow through the SIP route this year has been Rs 5,000 crore.
Continuous awareness programmes, investor education, engagements with investors' distributors have benefitted the industry over the last few years. The sector is aiming to increase its assets five-folds by 2025 to Rs 95 lakh crore while reaching an investors' base of over 13 million from current 5.5 million.
A Balasubramanian, CEO of Aditya Birla Sun Life Mutual Fund says, "It's a collective effort of all industry players and distributors over the past decade that sector could grow. Our endeavour is to continue with our efforts to make mutual fund reach across the country. Awareness programmes have really worked and Amfi will step up such engagements of investors and distributors. We have tried to bust several myths around mutual funds and want it to be part of everyday conversation."
The growth and pace of growth in participation from smaller towns and cities have been quite strong in recent years. The industry has been receiving flows from almost all parts of the country.
At a time when traditional avenues of investments - banks' fixed deposits, recurring deposits, provident funds, gold and real estate - are turning unattractive; mutual funds have been increasingly been opted for by investors. Further, given the ease of transactions, ease of online KYC which is also enabled Aadhaar-based, the sector has got the much-needed uplift in the last few years. Innovation by fund houses and registrars & agents like CAMs have also aided the growth of the sector as a whole.
As on July 31, the assets under management (AUM) of the mutual fund sector stood at 19.97 lakh crore against Rs 18.96 lakh crore in June.
Income funds July saw inflows of Rs 60,000 crore, balanced funds garnered Rs 7,864 crore. Gold funds continued to see net outflows. Put together, the month witnessed positive net inflows of Rs 63,504 crore after two consecutive months of outflows in April and May.
Currently, equity AUM for the industry is at the highest-ever level of Rs 7 lakh crore.