For the fourth month in a row, individual investors have continued to invest in equity-oriented mutual funds. The net inflow into these funds in June was about Rs 6,000 crore, down from Rs 10,082 crore the previous month as many investors took gains when the markets rallied sharply. The sector has had net inflows for eight months in a row before March of this year.
As the total number of SIP accounts passed the 4-crore mark, new investors are participating in mutual funds through the systematic investment plan (SIP) approach. SIP assets under management (AUM) accounted for over 15% of total sector AUM in June, with a contribution of Rs 9,155 crore.
Except for equity-linked savings schemes and value/contra funds, all equity-oriented categories had net inflows in June, showing that domestic investors are increasingly favoring Indian shares.
Morningstar India’s assistant director, Manager Research, Himanshu Srivastava, believes that excellent quarterly results and a long-term profits growth projection have mitigated fears of a major economic effect from the second wave of the pandemic.
Mid-cap funds gain
With Rs 1,729 crore and Rs 1,207 crore in June, respectively, the mid-cap fund category and sector/thematic funds are receiving considerable investments. Even Flexi-cap funds, which invest in a variety of markets, had a net inflow of Rs 1,087 crore in the month. In June, net inflows to small-cap funds were Rs 705 crore, while net inflows to large-cap funds totaled Rs 547 crore.
Mid-cap funds provide higher returns than large-cap funds, but they are also more volatile and riskier. Individuals with a high-risk appetite should look for suitable investment possibilities before investing in mid-cap funds.
Funds using a dynamic asset allocation
In June, individual investors deposited Rs 2,057 crore into dynamic asset allocation funds, as investors sought a balanced approach to equity and debt investments, as well as well-diversified assets, especially in an unpredictable market.
Furthermore, investors continued to choose arbitrage funds, with a net inflow of Rs 9,059 crore in the month, as returns from liquid funds went down due to relatively low yields.
The market regulator does not define a minimum or maximum limit for debt or equity investment in dynamic asset allocation funds. When the investment parameters are favorable, the fund management increases the exposure to stocks, and when they are not, the fund manager reduces it.