Equity mutual funds recorded a substantial net inflow of Rs 20,245 crores in August, a significant surge compared to the Rs 7,626 crore observed in July, says Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC.
In the month of August, the equity markets exhibited a risk-on sentiment, which is also reflected in the mutual fund flows.
This inflow marked the highest flows in the past five months. Small caps funds extended the positive trend into the current month with the highest net inflows, followed by thematic/sectoral funds and multicap funds. Consequently, August month witnessed a robust rally in mid and small-cap stocks, Chaturvedi said.
Conversely, liquid funds saw outflows amounting to 26,824 crore. Hybrid funds, on the other hand, recorded an uptick in net inflows, with arbitrage funds and multi-asset funds attracting the majority of these funds.
Overall, the markets continue to exhibit a bullish outlook, with new all-time highs on the horizon. Investors remain drawn to equity as an attractive asset class, he added.
Retail investors in India maintain a strong appetite for risk, consistently favoring small-cap and mid-cap stocks over large-cap ones for several months. As market participation grows and a wider range of companies gain attention, the overcrowding traditionally seen in large-cap stocks is diminishing, says Kislay Upadhyay, smallcase manager and Founder of FidelFolio Investments.
Although, there could be cases of overvaluation in pockets in smallcap stocks, the phenomena of increasing market width could be seen as a sign of sustained deepening of capital market in India.
Smallcap garnered highest inflow among all categories for 5th month in a row. Sectoral funds were second highest. Together, smallcap and sectoral funds accounted for 45 per cent total equity inflows. Large caps continued to lose sheen with net outflow for 4 months in a row, he said.
Smallcap continued to be investors’ favourite with highest growth in no. of folios for 4 months in a row. It grew 6 per cent in August. Multipcap was a close second at 5% growth in folios in august.