Investors' confidence surges as equity mutual funds inflows reach five-month high: Experts

Equity mutual funds have witnessed a substantial net inflow of Rs 20,161 crore in August 2023. This rise marked a significant departure from the Rs 7,505 crore recorded in July, establishing August as the month with the highest mutual fund inflows in the past five months. This surge signals renewed investor confidence in the stock market, despite challenges faced by large-cap stocks.

A Balasubramanian, Chairman of the Association of Mutual Funds in India (AMFI), expressed his optimism about the current state of the market. In an exclusive interview with CNBC-TV18, he emphasised, "The overall market sentiment definitely has been giving much-needed confidence to investors to put their faith in mutual funds as a relevant long-term savings option."

Balasubramanian believes that the current flow of money into equities reflects the trust investors have in the mutual fund industry. He also highlighted the growing popularity of Systematic Investment Plans (SIPs) as a vehicle for long-term saving and retirement planning. Balasubramanian's outlook is positive, anticipating that these investment flows will persist and continue to attract new investors.

He stated, "Flows have been largely coming through various routes, and my assumption would be that the flows would continue."

NS Venkatesh, Chief Executive of AMFI, focused on the midcap and smallcap segment of the market. He noted that these stocks had experienced corrections during recent market volatility, presenting an attractive opportunity for investors. Rather than picking individual stocks, many investors are turning to mutual funds to gain exposure to the midcap and smallcap space.

Venkatesh explained, "Investors recognise the value in midcap and smallcap stocks, particularly after recent corrections. They are opting for mutual funds like midcap funds and smallcap funds, allowing fund managers to select the right stocks within the portfolio. Even amid the recent euphoria in midcap and smallcap stocks, there remains untapped potential in certain stocks. Investors trust fund managers to make these selections."

Notably, small-cap funds continued their impressive performance in August too. These funds, characterised by their focus on smaller companies, drew the highest net inflows in August. This was followed closely by thematic/sectoral funds and multicap funds.

On the other hand, five NFOs from the sectoral fund category collectively garnered Rs 2,556 crore. A total of Rs 5,002 crore was raised through 7 NFOs in the equity categories, while Rs 2,247 crore was raised through one hybrid category scheme.

The Systematic Investment Plan (SIP) inflows in August 2023 even reached a record high of Rs 15,814 crore as compared to previous month's figure of Rs 15,243 crore. This robust surge in SIP investments has piqued the interest of both seasoned investors and newcomers alike.