SIP inflows cross ₹13k cr for the first time in October

Inflows into open-ended equity mutual funds fell 33% to ₹9,390.35 crore in October, with investors turning cautious over high valuations of Indian equities. However, they continued to show faith in systematic investment plans (SIPs), with inflows at ₹13,040 crore, breaching the 13,000 crore-mark for the first time, according to the Association of Mutual Funds in India (Amfi)’s monthly data. BSE benchmark Sensex surged nearly 6% in October amid the weakness in global markets on account of a looming recession and high inflation. In September, SIP contributions were at ₹12,976 crore.

“Markets continue to react to global factors and domestic rate hikes. However, mutual fund investors have shown resilience and continue to invest in SIPs, with consistent contribution month-on-month. There was overall growth in equity assets under management and folios, too,” N.S. Venkatesh, chief executive, Amfi, said.

Experts, however, flagged the dip in new SIP registrations. Akhil Chaturvedi, chief business officer, Motilal Oswal Asset Management, said: “To really gauge the retail investor sentiment, we need to closely watch the around 12% dip in number of new SIPs registered in October compared to the average of last two months.”

Sanjiv Bajaj, joint chairman and managing director, Bajaj Capital Ltd, said the decrease in inflows in equity funds could be attributed to high valuations of Indian equities, as it showed resilience in recent months and outperformed major global markets. Since last Diwali, the Nifty was up 1%, while the S&P 500 and emerging market indices were down 16% and 31%, respectively.

In equities, most categories saw inflows barring dividend yield funds. Thematic or sectoral funds saw the highest inflows of ₹2,686 crore, followed by ₹1,582 crore for small-cap funds and ₹1,385 crore in mid-caps. “Healthy inflows in thematic or sectoral funds could be attributed to the two new fund launches by fund houses during the month,“ said Bajaj.

For fixed income, open-ended debt funds saw outflows of ₹2,817.97 crore in October against net outflows of ₹65,372.40 crore in September. Categories witnessing inflows were liquid funds ( ₹19,084.60 crore), long duration funds ( ₹66.32 crore), gilt funds ( ₹146.31 crore), and gilt funds with a 10-year constant duration ( ₹20.19 crore).

“A rising interest rate environment that has been in place since May likely resulted in investors preferring to move out of the debt markets in favour of equities. With a rate hike cycle in place, which aims to bring inflationary pressures under control, investor preferences are trending away from debt funds,“ said Kavitha Krishnan, senior analyst manager research, Morningstar India.

Further, marginal growth (net inflows of ₹147 crore)was witnessed for gold exchange-traded funds (ETFs) last month with an AUM of ₹19,881 crore. “This move could be directed towards gold assets being considered as a tool for diversification of the portfolio by investors and a hedge against market volatility,” said Priya Agrawal, money coach, LXME, a neo-bank for women.