India equity fund inflows fall in July as large-caps see first outflows in over 2-1/2 years
- Foreign investors bought a net $2.12 billion of Indian equities in July after four straight months of outflows
Equity mutual fund inflows in India fell 14.8% month-on-month to 246.97 billion rupees ($2.59 billion) in July as large-cap funds saw outflows for the first time since December 2023, while investors poured record amounts into small-caps.
Equity funds, however, registered net inflows for a record 65th consecutive month, data from the Association of Mutual Funds in India showed on Tuesday, supported by stronger-than-expected corporate earnings, central bank support for the rupee and softer crude prices.
Large-cap funds recorded outflows of 13.22 billion rupees last month, compared with inflows of 20.67 billion rupees in June.
“Given FPIs’ relatively higher ownership of large-caps, a return in foreign buying may have encouraged domestic investors to book profits in the segment,” AMFI CEO Venkat Chalasani said.
India proposes tax relief for offshore funds using local managers
Foreign investors bought a net $2.12 billion of Indian equities in July after four straight months of outflows.
Meanwhile, small-cap fund inflows jumped 39% to an all-time high of 77.68 billion rupees in July, while mid-cap inflows rose 1.7% to 61.92 billion rupees.
“The willingness to deploy fresh capital into small- and mid-cap categories reflects investors’ comfort with taking calculated exposure to higher-growth segments of the market,” said Himanshu Srivastava, principal, manager research at Morningstar Investment Research India.
“Besides, the recent recovery in the mid- and small-cap segments appears to have reinforced investor confidence, encouraging continued allocations to these categories,” Srivastava said.
Systematic investment plans, the preferred route for retail investors, marked a 0.6% increase in contributions to 319.61 billion rupees, just shy of a record 320.87 billion rupees hit in March.
Since their lows in March and April, the small-caps and mid-caps have risen 32.6% and 22.6%, respectively, compared with a 10.3% rise in the Nifty.
Debt-oriented schemes attracted 1.88 trillion rupees ($19.7 billion) in July, their first inflow in three months.
“The near-term outlook for short-duration categories remains highly positive as institutional capital begins to redeploy,” said Umesh Sharma, CIO of debt at The Wealth Company Mutual Fund.
“Yields are expected to soften, supported by strong dollar inflows from FCNR(B) deposits… and a reduction in domestic debt supply,” he added.