India's equity fund inflows rise nearly a fifth in August; monthly savings plan contributions hit a record

Indian investors poured a record amount into mutual funds through monthly savings plans in August, continuing to invest even as the market came under pressure, data from the Association of Mutual Funds in India showed on Thursday.

Flows via systematic investment plans, the preferred route for retail investors, marked a 1.1% increase in contributions to 322.97 billion rupees ($3.39 billion) last month - an all-time high despite concerns that small investors would be spooked by months of volatility.

Persistent SIP inflows show that retail investors are looking through near-term volatility and continuing to allocate to Indian equities for the long term, said Hiren Dasani, chief investment officer for emerging markets at WhiteOak Capital.

Overall equity mutual fund inflows in India jumped 18.8% month-on-month to 293.29 billion rupees, with small- and mid-caps seeing record high monthly buying, the data showed.

Inflows into mid-caps rose about 13% to 69.89 billion rupees, while small-cap inflows grew 2.6% from a higher base in July to 79.73 billion rupees.

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The record flows point to resilient domestic investor appetite despite heightened global volatility and weakness in Indian equities.

“The market is eventually more about where the earnings growth is, and that is translating into better returns for individual companies,” said Dasani, chief investment officer for emerging markets at WhiteOak Capital.

Record high inflows in broader markets propelled the small-caps and mid-caps to all-time highs in August, even though the benchmarks Nifty 50 and Sensex declined 1.2% and 1.5%, respectively, on rising oil prices and higher odds of a near-term U.S. rate hike.

“While global cues such as geopolitical tensions in the Middle East are very volatile, domestic cues are positive. If you see (domestic) growth data and the RBI’s measures to support the rupee, the trend of positive inflows has continued,” said Venkat Chalasani, CEO of AMFI.

Equity funds have now registered net inflows for a record 66 consecutive months.

In contrast to the broader market, large-caps saw outflows of 11.47 billion rupees for the second straight month.

Among exchange-traded funds, inflows into gold ETFs jumped 67% month-on-month to 25.97 billion rupees in August.