India’s equity mutual fund inflows come off record highs in November

Dec 10 – Inflows into India’s equity mutual funds declined 14.2% in November, after hitting a record high in the previous month, but offset hefty foreign outflows as domestic investors continued their buying spree undeterred by a market correction.

Inflows stood at 359.43 billion rupees during November, the 45th consecutive month of inflows, the longest on record, data released by the Association of Mutual Funds in India on Tuesday showed.

India’s benchmark NSE Nifty 50 and BSE Sensex as well as the broader smallcaps and midcaps, slipped into correction territory in November, a 10% drop from their record high levels in September. They have staged a recovery in the last three weeks.

The net inflows into equity mutual funds were well above the foreign outflows of 216.12 billion rupees, helping the benchmarks erase their monthly losses in November.

While the overall inflows have moderated from record high levels, “the sustained buying by mutual funds during the correction indicates that fund managers are seeing some value in the market after the recent drop,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company.

Among equity-oriented funds, sectoral and thematic funds saw a moderation of 37.6%, reflecting the launch of fewer such fund offers in November than in October.

In December, Aditya Birla Sun Life Mutual Fund launched a conglomerate fund that will invest in the companies of top corporations in India.

Smallcap funds and midcap mutual funds saw a 9% and 4.3% rise in inflows, respectively, while inflows into largecap funds fell 26.2%.

The availability of selective attractive opportunities in fundamentally strong smallcap and midcap companies has helped sustain inflows into the segment, said Nikhil Rungta, chief investment officer of equity at LIC Mutual Fund.

“We always maintain sufficient cash reserves to deploy strategically if market corrections present attractive investment opportunities,” Rungta said.

Contributions to systematic investment plans, where investors make regular payments into mutual funds, fell to 253.20 billion rupees, snapping a 16-month streak of recording fresh highs.

The drop in SIP contributions isn’t a cause for concern, as the fall is very marginal to 253.20 billion rupees from 253.23 billion rupees, said Venkat Chalasali, chief executive of AMFI.

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