Mutual fund allocations bounced back in India last month, driven by strong retail participation, with investors also seeking out gold and silver funds in the hunt for stronger returns.
Indian equity mutual fund inflows rose 24% to 235.87 billion rupees($2.75 billion), snapping a five-month decline, as investors poured money across segments and turned to gold and silver ETFs in search of returns amid rising global trade uncertainty.
India’s mutual fund industry hit a new record in June, with net assets under management (AUM) climbing to 74.41 trillion rupees.
The inflows supported the benchmark Nifty 50, which gained 3% for the month, while the small-caps and mid-caps jumped 6.7% and 4%, respectively.
Gold Exchange Traded Funds saw inflows surge ten-fold month-on-month to 20.81 billion rupees in June, hitting a five-month high, data from the Association of Mutual Funds in India showed on Wednesday.
“Rising inflows into Gold ETFs suggest investor interest to seek both diversification and gain from the performance of the precious metal,” said Anand Vardarajan, chief business officer at Tata Asset Management.
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Silver ETFs attracted inflows of 20.04 billion rupees, up from 8.53 billion rupees in May.
Large-cap equity mutual funds recorded a 36% monthly jump to 16.94 billion rupees, while small-cap and mid-cap funds posted a 25% and 34% rise in inflows.
Contributions via systematic investment plans (SIPs) – a popular periodic investment route for mutual fund investors - rose to a record 272.69 billion rupees in June. The number of contributing SIP accounts also climbed to 86.4 million from 85.6 million in May.
“Strong inflows and record SIPs reflect improved sentiment, better valuations post-correction, and the enduring structural confidence in Indian equities,” said Himanshu Srivastava, associate director, manager research at Morningstar India.
If June-quarter earnings hold up and macro stability continues, strong domestic inflows could cushion markets from foreign outflows and trade jitters, two analysts said.
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