Equity mutual fund schemes attracted net inflows of ₹38,306.55 crore in September, up nearly 31% from ₹29,328.62 crore in August, even as equity markets corrected and foreign portfolio investors (FPIs) resumed selling. However, heavy outflows from debt funds pushed the mutual fund industry's overall net flows into negative territory.
According to data released by the Association of Mutual Funds in India (AMFI), debt mutual funds recorded net outflows of ₹1.83 lakh crore in September, compared with ₹8,127.32 crore in August. The industry as a whole reported net outflows of ₹1.33 lakh crore, reversing net inflows of ₹41,368.05 crore in the previous month.
As per the data, monthly systematic investment plan (SIP) inflows into mutual funds hit a record ₹32,490 crore in September.
Manish Mehta, Chief Business Officer at SBI Mutual Fund, said investors appeared to have used market declines as an opportunity to increase their investments and average their acquisition costs.
“Overall numbers were negative since institutional investors redeemed due to advance tax and quarter-end compliance. SIP numbers were more or less flat, but it is heartening to see investor confidence in using SIPs as a tool to take advantage of market volatility,” he said.
Small-cap, mid-cap funds lead equity inflows
Small-cap funds attracted the highest net inflows among equity-oriented categories at ₹9,039 crore in September, up from ₹7,973 crore in August. Mid-cap funds received ₹7,835 crore, compared with ₹6,989 crore in the previous month. Together, the two categories accounted for around 44% of total net equity inflows.
Flexi-cap funds attracted ₹6,702 crore, against ₹5,059 crore in August. Large-and-mid-cap funds received ₹4,271 crore, while multi-cap funds garnered ₹3,860 crore. Large-cap funds returned to net inflows of ₹859 crore after recording outflows of ₹1,147 crore in August.
Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said the sharp increase in equity inflows was encouraging given the correction in markets and renewed FPI selling. The divergence between market performance and domestic mutual fund flows underscored investors' willingness to look beyond near-term volatility, he said.
Suranjana Borthakur, Head of Distribution and Strategic Alliances at Mirae Asset Mutual Fund, said the strength of September's flows lay in their breadth, with small-cap inflows reaching a record high and mid-cap inflows touching a multi-month high. The inflows indicated that investor interest was spread across market-cap categories rather than concentrated in one segment.
However, Srivastava cautioned that sustained interest in mid- and small-cap funds warranted attention given elevated valuations in some pockets of the market and the higher volatility associated with these segments.
Nirav Karkera, Head of Research and Fund Manager at W by Groww, said the strong equity inflows reflected investors' continued faith in equities as a long-term wealth creation avenue. Some of the increase could also have come from money moving out of debt and hybrid funds, he added.
Sectoral funds saw a turnaround, recording inflows of ₹1,840 crore in September against outflows of ₹53 crore in August. Five equity new fund offers (NFOs) collectively mobilised ₹998 crore during the month, suggesting that the improvement in flows was driven predominantly by existing schemes.
SIP inflows hit record ₹32,490 crore
Systematic investment plan (SIP) contributions touched a record ₹32,490 crore in September. Karkera said the increase, when viewed alongside SIP stoppages, could reflect a combination of fresh investments and investors switching the schemes through which they invest.
In the passive investment segment, equity exchange-traded funds (ETFs) attracted ₹9,960 crore in September, while gold and silver ETFs received ₹4,451 crore and ₹1,974 crore, respectively.
Karkera said gold continued to attract investor interest amid global economic uncertainty, rupee weakness and geopolitical tensions. The metal also offered diversification at a time when domestic equities were experiencing volatility.
Rohit Sarin, Co-founder of Client Associates, said the flows into equity and precious-metal ETFs highlighted the growing importance of diversification, with investors balancing equity participation against portfolio resilience.
Hybrid funds recorded net outflows of ₹457 crore in September, reversing inflows of ₹10,045 crore in August. Arbitrage funds saw outflows of ₹3,956 crore, attributed to quarter-end redemptions. However, multi-asset allocation funds attracted ₹3,667 crore, while aggressive hybrid funds received ₹1,864 crore.
The mutual fund industry's assets under management stood at ₹82.64 lakh crore at the end of September, down from ₹87.08 lakh crore in August.
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