SIP inflows hit all-time high but equity MF slows down in July

Investors are betting big on systematic investment plans or SIP to generate long-term wealth with the monthly flow in the mutual fund industry through the route reaching an all-time high of Rs 15,245 crore in July.

The record high SIP numbers came despite the equity mutual funds registering a 12 per cent month-on-month decline in inflow to Rs 7,626 crore in July, data with the Association of Mutual Funds in India (Amfi) showed on Wednesday. "The surge in retail investors' interest in mutual funds has translated into impressive inflow across scheme categories. The star performer this month has been SIP, with an impressive over 33 lakh new SIP accounts registered and a record Rs 15,215 crore of monthly contribution," Amfi CEO N S Venkatesh said.

The monthly SIP contribution in July was way higher than Rs 14,734 crore inflow seen in June and Rs 14,749 crore in May, which was the previous high. Interestingly, the inflows through SIPs have been above Rs 13,000 crore since October 2022. With this, the total inflow has reached nearly Rs 58,500 crore in the first four months (April-July) of the current fiscal. This came following an inflow of over Rs 1.56 lakh crore in the preceding financial year (2022-23). SIP is an investment methodology offered by mutual funds wherein an individual can invest a fixed amount in a chosen scheme periodically at fixed intervals, say once a month, instead of making a lump sum investment. The SIP installment amount can be as small as Rs 500 per month.

Mutual fund industry mainly depends on SIPs for inflows with equity funds continuing to witness the 29th consecutive month of net inflows. However, the inflow dropped to Rs 7,626 crore in July from Rs 8,637 crore in the preceding month.

"The drop in net inflow in July from June could be attributed to some investors booking profit with markets trading near all-time highs. Some investors would have also chosen to stay on the sidelines and wait for some rationalisation to set in before they invest," Himanshu Srivastava, Associate Director - Manager Research at Morningstar India, said.

The latest inflow in equities was largely driven by five new fund offerings (NFOs) which cumulatively collected Rs 3,011 crore. Moreover, categories like mid and small cap have received significant flows during the month under review.

Overall, the 43-player mutual fund industry registered net inflows of Rs 82,046 crore in the month under review on contributions from debt-oriented schemes. This was followed by a withdrawal of Rs 2,022 crore in the preceding month.

The inflow pushed the Assets Under Management (AUM) of the industry to Rs 46.37 lakh crore at the end of July from Rs 44.39 lakh crore in June-end. Apart from equities, hybrid schemes logged Rs 12,421 crore in July, lower than Rs 14,193 crore in the preceding month.

"Overall industry witnessed growth post the June quarter ending factor where institutional investors redeemed due to quarter end phenomenon. All-time high of equity markets has led to profit booking by investors. Investors should consider asset allocation products and continue SIPs," Manish Mehta, National Head - Sales, Marketing & Digital Business at Kotak Mahindra Asset Management Company, said.

In addition, debt oriented schemes received a robust net inflow of Rs 61,400 crore in July after witnessing a net outflow of Rs 14,135 crore in June, which was the quarter end.

While Overnight Fund, Short Duration Fund, Medium Duration Fund, Credit Risk Fund, Banking and PSU Fund and Gilt Fund with 10-year constant duration categories witnessed net outflow and all the other categories received in inflow.