Despite most major categories recording negative fund flows at the aggregate level, the Indian mutual fund industry’s asset base trickled up by ~1% in August compared with July end numbers, on the back of mark to market (MTM) gains in domestic equities. The cumulative asset base increased by ~Rs 37,495 crore to settle at Rs 27.49 lakh crore, marking the fifth consecutive month of gains for the industry.

Net outflows in open-ended equity funds accelerate in August

July marked the first time open-end equity funds witnessed net outflows since the Association of Mutual Funds in India (AMFI) began disseminating data in its current format in April 2019. In August, investors continued to redeem their equity investments, and net outflows in the category accelerated to Rs 4,000 crore, from Rs 2,480 crore in July.

Apart from focused funds, sectoral funds, and equity-linked savings scheme (ELSS) schemes that saw combined net inflows of ~Rs 404 crore, every other open-ended equity category recorded outflows. Multi and large-cap schemes bled the most, witnessing net outflows of a cumulative Rs 2,711 crore compared with corresponding outflows of Rs 1,398 crore the month before. Value / contra and midcap funds also remained out of favour – combined net outflows for both categories stood at Rs 1,383 crore in August, higher than the corresponding outflows of Rs 1,128 crore in July.

Notwithstanding the trend in fund flows, the overall equity fund asset base inched up by 4.3% in August, helped by mark to market gains. The benchmark stock indices, namely the S&P BSE Sensex and Nifty 50, rallied 2.7% and 2.8% respectively in August. Buying support by foreign institutional investors (FIIs), who purchased equities worth Rs 42,821 crore during the month, significantly higher than similar purchases of Rs 8,590 crore in July.

Net inflows continue in ETFs

Exchange traded funds (ETFs) continued to sustain investments (with the exception of gold), recording net inflows of Rs 1,722 crore in August, though sharply lower than the Rs 13,126 crore of inflows in the previous month. Further, a fall in gold prices did not deter investments in gold ETFs, with the category seeing net inflows of Rs 908 crore, almost in line with the number witnessed in July. Gold prices, as represented by the Crisil gold index, fell 2% in August after advancing 9.1% on-month in July.