Inflows into equity funds at 22-month high as markets scale record highs

New Delhi: Inflows into equity funds in India surged to a 22-month high in January, driven by investments into multi and smallcap schemes as the markets scaled record highs, said Deepak JasaniDeepak Jasani, Head Retail Research at HDFC Securities.

Net investment into equity and equity-linked schemes surged 28 per cent over the previous month to Rs 21,780 crore in January. SIP contribution to the mutual funds industry stood at a record Rs 18,838 crore in January, compared to Rs 17,610 crore in December, he said.

Akhil Chaturvedi, Chief Business Officer, Motilal Oswal Asset Management Company, said that despite slight volatility in January, the market closed flat on a month-on-month basis.

Sectoral/thematic and smallcap oriented funds were the primary contributors, with contributions of Rs 4,804 crore and Rs 3,256 crore, respectively. However, this was lower than the previous month's flows. Multicap category funds also witnessed a significant increase, reaching Rs 3,038 crore in January from approximately Rs 1,852 crores in December 2023.

Largecaps demonstrated positive contributions this month, reversing the net outflows experienced in December 2023. This shift in trend is in line with valuation differentials among large v/s mid and small caps, suggesting that large caps/flexi caps oriented schemes may attract higher flows in the future, he said.

Kislay Upadhyay, Founder at FidelFolio Investments, said while FPIs pulled out from equity in January, domestic investors showed highest interest in January vs entire FY24 - both in terms of number of folios and net inflows in equity.

Total equity folios have increased by 3.3 per cent in January, the highest growth in absolute and percentage terms in the last nine months.

Owing to both higher inflows and lower outflows in January, net inflows have increased to Rs 21,781 crore. This is up 28 per cent from December and up 73 per cent from average inflow of last eight months. While FPIs increased inflow in debt schemes, individual investors showed lower interest as seen in reduction in number of folios in debt schemes.

Investors still continue to be attracted towards smallcap funds with yet another jump of 6 per cent in the number of folios. From 1.11 crore folios in April 2023, smallcap folios jumped by 60 per cent to 1.78 crore in January, Upadhyay said.