Equity mutual funds record strong inflows in June despite market turmoil

Equity funds in India continued to witness inflows during the month of June 2022. Equity-oriented categories witnessed a net inflow of Rs 15,497.76 crore, slightly lower as compared to Rs 18,529.43 crore in May 2022 and Rs 15890.38 crore during the month of April 2022, according to AMFI monthly data for June 2022.

Commenting on the same, Kavitha Krishnan, Senior Analyst – Manager Research, Morningstar India, said, “Despite the correction that the markets witnessed mid-June, retail investors have continued to back up equity funds with strong SIP flows. This is evidenced by the inflows, that have continued to remain strong across all categories. We’ve also witnessed a slight increase in the number of folios as compared to the last month.”

“This is despite the record high FII selling that we have witnessed during the month of June 2022. Large cap, Large and mid-cap and Flexi cap funds garnered the most flows within the equity funds category, despite there being no new fund launches during the month of June 2022,” she added.

Continuous FII selling since October 2021 has likely impacted the magnitude of flows on the back of concerns over a global recession, the upcoming US midterm elections, and their focus on regulating inflation. Despite this, Indian retail investors continued to place their confidence in equity-oriented funds, making opportunistic use of the correction in the markets. The decline in the prices of bitcoins and Ethereum, a relatively lower return offered in other traditional investment products and an increased awareness towards long-term investing among investors have likely led to continued flows.

During the month, Index funds and other ETFs combined received net inflows of Rs 12659.69 crore. Passively-managed funds have gained prominence amongst investors over recent times, and they have been actively adding these funds in their portfolio from diversification perspective.

Arun Kumar, Head of Research, FundsIndia, said, “Despite significant FII selling over the last several months, the market impact has been reasonably contained, thanks to the strong DII flows. Usually, whenever markets are volatile and the recent 1Y returns become weak as it’s happening now, DII flows tend to weaken. Bucking the trend, Equity mutual funds continued to receive strong inflows for June 2022. While this is positive for the markets, we need to keep a close watch on the Equity MF inflows and SIP trend in the coming months as they are critical given the backdrop of strong FII outflows.”

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