Equity mutual funds in India observed July inflows of ₹7,505 crore, down from June’s ₹8,245 crore. ETFs saw an outflow of ₹353 crore. Small-cap funds also experienced decreased inflows. Passive funds gain popularity.

July’s Net Inflows and ETF Outflows

Equity mutual funds displayed a net inflow of ₹7,505 crore in July 2023, a marginal decrease from the ₹8,245 crore inflow seen in June. Data from the Association of Mutual Funds in India (AMFI) revealed that Exchange Traded Funds (ETFs) experienced an outflow of ₹353 crore in July, in contrast to the ₹3,402 crore inflow observed in June.

Small-Cap Funds and Changing Inflows

July saw a reduction in inflows for small-cap funds, recording ₹4,171 crore, a decline from the previous month’s ₹5,472 crore inflow.

June Insights: Market Rally Impact

June witnessed a surge in the stock market, driving equity mutual funds to attract ₹8,637 crore – the highest net inflow in three months. This was significantly higher than May’s ₹3,240 crore inflow and April’s ₹6,480 crore. Additionally, Systematic Investment Plan (SIP) inflows reached ₹14,734 crore. Hybrid schemes garnered an inflow of ₹4,611 crore, with a notable portion flowing into arbitrage funds at ₹3,366 crore.

Rise of Passive Funds

Over the past years, passive funds have gained prominence among Indian investors, capturing more than 17% of assets under management (AUM) in 2023, a significant rise from the 1.4% market share in 2015. These funds include passive index funds, Exchange Traded Funds (ETFs), and Funds of Funds investing in ETFs.

Investor Insights and Preferences

A study conducted by Motilal Oswal Asset Management Company highlights that 61% of participants have invested in at least one passive fund. Notably, 53% of respondents increased their allocation to passive funds in the last 12 months. Investors cite the cost-effectiveness of passive funds as the primary reason for their choice, followed by the straightforward nature of these investments and favorable market returns.