India equity mutual fund inflows rebound from one-year low

Flows to India’s equity mutual funds jumped 26.5% month-on-month in June, from their lowest in a year, as easing Middle East tensions and rupee-stabilising measures lifted sentiment.

This marks five years and four months of net inflows to equity mutual funds, the longest streak on record.

Inflows climbed to 289.73 billion rupees ($3.04 billion) from 229.08 billion rupees in May, data from the Association of Mutual Funds in India showed on Friday.

Large-cap, mid-cap and small-cap funds registered sequential increases in flows of 34%, 39% and 13% respectively.

“Rising equity inflows show investors are willing to look past near-term global shocks from the Iran conflict and stay focused on the underlying strength of the Indian economy,” said Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management.

“Strong credit growth, healthy GST collections and resilient nominal GDP all point to the possibility of earnings upgrades.”

India’s equity mutual funds show first inflows after 8 months

India’s benchmark Nifty 50 index rose 1.4% in June, while small-caps and mid-caps gained 4% and 0.1%, respectively.

Greater comfort on valuations and expectations of an earnings recovery in the second half of the year are driving stronger flows into broader markets, where mid- and small-caps offer meaningful alpha, analysts at stock broker SMC Global and portfolio management service Fident said.

Rising sip contributions

Systematic investment plans, the preferred route for retail investors, marked a 3% increase in flows to 317.81 billion rupees, just shy of a record 320.87 billion rupees in March.

Gold ETFs recover

Inflows to gold exchange-traded funds rose to 34.43 billion rupees, a month after seeing record outflows of 7.25 billion rupees in May, when India raised import tariffs on gold and silver to 15% from 6% to curb imports and ease pressure on foreign exchange reserves.

Iran war drags India MF equity flows to annual low; gold ETFs see record outflows

AMFI Chief Executive Venkat Chalasani said the pullback in gold prices after a strong run made gold ETFs more attractive, drawing investors back into the category.

“The outlook for overall mutual fund inflows and SIPs remains strong, supported by improving market liquidity after the RBI’s rupee-stabilising measures, softer oil prices and resilient domestic macro fundamentals,” Chalasani said.