Large-Cap MF Schemes Show Outflow for First Time Since December 2023; Equity Flows Fall 15%

Large-cap mutual fund schemes recorded their first monthly outflow since December 2023 in July, leading to an overall month-on-month decline of 14.8% in equity mutual fund inflow. The shift came even as small-cap and mid-cap schemes continued to attract inflows and the broader mutual fund industry's assets under management rose.

Net equity inflows fell to 246.85 billion rupees in July from 289.61 billion rupees in June, according to data released by the Association of Mutual Funds in India (AMFI).

Large-cap funds recorded a net outflow of 13.22 billion rupees in July, reversing an inflow of 20.68 billion rupees in June.

Flows into other equity categories remained positive. Small-cap funds received 77.68 billion rupees in July, up from 56.02 billion rupees in June, while mid-cap funds attracted 61.92 billion rupees compared with 60.90 billion rupees in the previous month.

Sectoral and thematic funds recorded inflows of 13.28 billion rupees, down from 14.69 billion rupees in June. ELSS funds saw outflows of 9.59 billion rupees, compared with 6.34 billion rupees in June, while dividend yield funds reported outflows of 1.69 billion rupees against 0.49 billion rupees previously.

Debt mutual funds recorded net inflows of 1.87 trillion rupees in July, reversing outflows of 1.09 trillion rupees in June and 969.48 billion rupees in May.

Liquid funds accounted for most of the debt inflows, receiving 1.19 trillion rupees in July. The category had recorded an outflow of 42.29 billion rupees in June. The reversal in liquid fund flows points to a return of institutional and corporate allocations to short-term debt instruments after two months of withdrawals.

Corporate bond funds, however, remained in negative territory, with outflows of 7.85 billion rupees in July compared with 75.57 billion rupees in June. Credit risk funds recorded inflows of 1.45 billion rupees, lower than 2.48 billion rupees in the previous month.

Hybrid funds continued to receive inflows, although the pace moderated. The category attracted 114.90 billion rupees in July compared with 128.93 billion rupees in June. New fund offer (NFO) inflows increased to 20.22 billion rupees from 4.60 billion rupees in June.

Flows into exchange-traded funds (ETFs) also declined to 95.12 billion rupees from 132.38 billion rupees. Gold ETFs received 15.59 billion rupees in July, down from 34.43 billion rupees in June, indicating lower allocations to the segment during the month.

Despite the fall in equity inflows, total mutual fund industry assets under management rose to 85.59 trillion rupees in July from 82.22 trillion rupees in June. The increase reflected market gains and the reversal of flows into debt-oriented schemes.

The July data shows a shift in mutual fund allocation, with investors reducing exposure to large-cap equities while continuing to allocate to mid- and small-cap funds.