India's mutual fund industry witnessed a moderation in equity flows in May, largely weighed down by higher redemptions despite systematic investment plan inflows holding firm at all-time highs. Equity mutual fund flows, excluding arbitrage and NFOs, dropped 21% month-on-month to Rs 22,700 crore, marking the first net outflow in lumpsum equity investments since July 2023, Jefferies pointed out.
Despite the moderation, brokerages are maintaining a constructive outlook. Nomura maintained its preference for HDFC AMC and Nippon Life India AMC, citing strong AUM and operating profit growth visibility.
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Nomura also reported a decline in net equity inflows to Rs 24,200 crore in May, down from Rs 26,900 crore in April. In contrast, SIP inflows remained resilient, coming in flat month-on-month at Rs 26,700 crore—a 28% jump from the previous year. SIP accounts climbed to 8.56 crore, up 2% monthly and 30% annually. SIP assets under management rose to Rs 14.6 lakh crore, reflecting 27% year-on-year growth.
Bernstein noted that while both SIP and lumpsum inflows held up in May, redemptions surged, resulting in a net monthly MF inflow drop of 11% from April and nearly 48% off the December quarter highs. SIPs were the key driver of gross inflows and are expected to continue leading net inflows in the fiscal. Bernstein maintained its forecast of $40-45 billion in net flows from households into mutual funds during the financial year, translating to 8-9% of active equity and hybrid AUM.
Equity fund flows faltered across most categories. Large-cap fund inflows plunged 53% month-on-month, while small-cap, mid-cap, and flexi-cap funds saw drops of 20%, 15%, and 15% respectively. Sectoral/thematic funds held steady at Rs 2,100 crore, while large-and-midcap funds inched up marginally.
On the debt side, inflows into debt mutual funds slowed to Rs 20,700 crore from Rs 43,800 crore in April. Liquid funds witnessed a sharp reversal, recording outflows of Rs 37,100 crore against record inflows of Rs 1.74 lakh crore in the previous month.
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