August has been a watershed month for mutual funds with cumulative inflows crossing ₹20,000 cr

• Pharma and infra funds were among the top performing category, while IT funds recovered and made a strong comeback.
• Smallcap funds stole the show with monthly inflows of ₹4,265 crore against ₹4,171 crore in July.
• Smallcap funds continue to perform well and have outperformed in the recent rally from the lows in March 2023.
  

August has been a watershed month for the mutual fund industry with total assets of the industry touching ₹47 lakh crore. Of this, ₹24 lakh crore is in equity, hybrid and solution oriented schemes.

Barring new fund offers, inflows were higher at ₹15,200 crore in August compared to ₹4,600 crore in July 2023. Total inflows including NFOs in August stood at ₹20,200 crore against ₹7,600 crore in July. Indian investors are systematic about their investments now and through the systematic investment plans they have pumped in ₹15,814 crore into equity oriented funds.

The 40% rally in midcap stocks has had a ripple effect on inflows into midcap funds too, which saw investors pumping in ₹2,500 crore in August against ₹1,600 crore in July. Multi-cap funds saw inflows of ₹2,000 crore against ₹1,000 crore in July. Large cap funds continued to see outflows, while thematic funds flows increased by ₹2,500 crore.

Smallcap funds stole the show with monthly inflows of ₹4,265 crore against ₹4,171 crore in July. Inflows in eight months from January 2023 to August 2023 is at ₹26,000 crore. Last year, at the same time (Jan-Aug 2022), inflows were at ₹13,000 crore. In debt, corporate bond funds saw higher inflows after many months.

In the last six months, pharma and infra funds were among the top performing categories, while IT funds recovered and made a strong comeback. Infrastructure funds have seen consistent outperformance in the last one year as cyclical sectors outperform stable sectors like IT and Pharma. The banking sector similar to the infrastructure sector has been at the forefront in terms of performance in the last one year.

After the battering, IT funds outperformed in the last three months,having underperformed prior to that, says ICICI Securities. The research house says that pharma funds followed the performance trajectory of IT funds, which after having underperformed significantly in the last one year, staged a comeback in the last three months as investor’s interest was visible at lower levels.

Small cap funds continue to perform well and have outperformed in the recent rally from the lows in March 2023. In the last four months, from the lows in March 2023, BSE Small cap index is up 30% while the S&P BSE Sensex is up less than 17%. Small cap funds have seen significant underperformance in the last few years. If overall markets remain stable, small cap funds may continue to outperform, going forward.