Investors in India's mutual funds are pursuing equities, gold, and silver in a relentless pursuit of returns.
In a notable development, the Indian mutual fund industry witnessed a significant surge in June, marking an end to a five-month decline in mutual fund inflows. The industry's net assets under management (AUM) hit a new record of 74.41 trillion rupees, according to recent reports.
The increase in mutual fund allocations was primarily driven by factors related to equity mutual funds. The Nifty 50 index, as well as mid- and small-cap indices, performed well, boosting investor sentiment and drawing investors back to equity schemes.
Investors were attracted to equities due to better valuations compared to other asset classes. Additionally, portfolio reallocation towards equity mutual funds amidst subdued returns from other assets played a significant role. Systematic Investment Plan (SIP) inflows also rose, contributing to increased mutual fund allocations.
Flexi-Cap Funds, which offer flexible allocation strategies, were particularly popular, attracting Rs 5,733 crore in inflows last month. Large-cap equity mutual funds also recorded a 36% monthly jump to 16.94 billion rupees in June.
While gold and silver funds did not see significant inflows in the reports, investors in India also sought out these funds last month in search of stronger returns. In fact, silver ETFs attracted inflows of 20.04 billion rupees last month, up from 8.53 billion rupees in May.
Two analysts suggested that if the June-quarter earnings hold up and macro stability continues, strong domestic inflows could cushion markets from foreign outflows and trade jitters. Anand Vardarajan, chief business officer at Tata Asset Management, commented that the rising inflows into Gold ETFs indicate a desire for diversification and performance gains from the precious metal.
Himanshu Srivastava, associate director, manager research at Morningstar India, stated that strong inflows and record SIPs reflect improved sentiment, better valuations post-correction, and the enduring structural confidence in Indian equities.
The mutual fund industry's resurgence in June was also a testament to strong retail participation. Contributions via systematic investment plans (SIPs) reached a record 272.69 billion rupees in June.
Small-cap and mid-cap funds posted a 25% and 34% rise in inflows, respectively, last month. This surge in gold ETF inflows represents a five-month high, suggesting investor interest in seeking diversification and potential gains from the performance of the precious metal.
The mutual fund industry's robust performance in June underscores the continued confidence of investors in the Indian equity market, offering a promising outlook for the future.
- The investors' interest in equities increased due to better valuations compared to other asset classes and higher returns from equity mutual funds.
- Flexi-Cap Funds and large-cap equity mutual funds were particularly popular, attracting significant inflows last month.
- While gold and silver funds did not see significant inflows in reports, they were sought after last month by investors looking for stronger returns and diversification.
- An analyst suggested that strong domestic inflows could cushion markets from foreign outflows and trade jitters, with rising inflows into Gold ETFs indicating a desire for diversification and performance gains from the precious metal.
- The surge in gold ETF inflows marks a five-month high, suggesting investor interest in seeking diversification and potential gains from the performance of the precious metal.
