NFO rush pushes July inflows in MFs to 27-month high | Economic Times

Equity mutual funds in July received the highest monthly flows in 27 months as continued strength in the market encouraged retail investors to pour more money into these products. Flows into equity schemes in July was ₹22,583 crore, nearly four times the inflows of ₹5,988 crore in June and the highest since April 2019 — when the industry body changed the reporting format. New fund offers contributed nearly half of the flows during the month.“In my estimation, NFOs (new fund offers) have contributed 40-50% to the net inflows in equity schemes,” said Raghav Iyengar, chief business officer at Axis Mutual Fund.Four equity NFOs raised around ₹13,709 crore in July. Out of this, ICICI Prudential Mutual’s Flexicap fund launch alone mobilised ₹9,808 crore.“One has to realise that there is “retail euphoria” in the markets,” said Iyengar. “This euphoria is largely because of the lack of alternatives in terms of viable investment avenues. One can see this euphoria in the primary markets itself. Look at the subscription levels of the recent Initial Public Offerings (IPOs).”A chunk of the flows into these equity NFOs could have been on account of churn from the existing schemes.“I think there could be a strong possibility that existing investors may have invested heavily in NFOs because of unattractive performance of the schemes they invested in,” said a fund manager who wished not to be named.Monthly flows through systematic investment plans (SIPs) rose to ₹9,608 crore as against ₹9,155 crore in June. The new SIP accounts have risen by 3.7% to 4.17 crore in July from the previous month. Debt schemes too witnessed net flows of ₹73,694 crore in July, taking the total assets under management of the mutual fund industry to ₹35.3 lakh crore from ₹34.1 lakh crore in June. Among equity schemes, the flexi-cap category attracted the highest inflow of ₹11,508.2 crore, followed by thematic or sectoral funds which saw inflows of ₹5,728 crore. These categories got a bigger share of the flows because of the NFOs.“There are clear factors which have contributed to such high flows in flexi-cap schemes. There were savings during the lockdown period, partial restoration of salary and rise in hiring, especially in IT and pharmaceuticals sectors,” said Rupesh Bhansali, head, mutual funds, GEPL Capital.Funds that invest in small- and mid-cap stocks — the flavour of the season — saw inflows of ₹1,778 crore and ₹1,487 crore, respectively thanks to the heightened interest of retail investors in smaller companies. Many investors are making incremental investments or shifting money into hybrid products as valuations of domestic markets are at all-time highs. For instance, arbitrage funds saw flows of a considerable ₹14,924 crore in comparison with ₹9,059 crore in June. 85191355