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Equity mutual funds witnessed a net inflow of over Rs 10,000 crore in May, making it the highest infusion in 14 months, due to rally in stock markets on the back of declining COVID-19 cases and robust quarterly earnings.

This is also marks the third consecutive monthly inflow after Rs 3,437 crore net inflow seen in April and Rs 9,115 crore in March, data from the Association of Mutual Funds in India (Amfi) showed on Wednesday.

Prior to this, equity schemes had consistently witnessed outflow for eight straight months from July 2020 to February 2021.

“With stock markets moving to all time highs, investors continued their preference towards mutual funds and this trend could continue in the coming months,” Gopal Kavalireddi, Head of research, FYERS, said.

Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said that significant improvement on the coronavirus situation with daily COVID-19 cases falling consistently, along with improving recovery rate, over the last few weeks, would have provided comfort to investors.

“Good quarterly results, positive earnings growth outlook over the long-term and waning concerns of any severe impact of the second wave of the pandemic on the economy, would have also boosted sentiments. This would have prompted investors to again allocate assets towards equities,” he added.

Decreasing COVID cases and gradual opening of economy and normal rainfalls forecast can be a contributing factor for staggering inflow in equities in May, Priti Rathi Gupta, Founder of LXME, said.

As per the data, inflow from equity and equity-linked open ended schemes was at Rs 10,083 crore in May. This was the highest inflow since March 2020, when equity schemes had seen a net infusion of Rs 11,723 crore.

Barring equity-linked saving schemes (ELSS), which saw a withdrawal of Rs 290 crore, all the equity schemes have seen inflow last month.

Within the categories of equity funds, multicap funds saw the largest net inflow at Rs 1,954 crore. This was followed by a net inflow of Rs 1,368 crore in midcap funds.

“Investors who have accumulated higher savings in the last year due to lower spending and were staying on the sidelines are slowly getting back. The strong returns in equities and the stability of the markets despite the second wave provide the much-needed positive nudge,” Arun Kumar, Head of Research at FundsIndia, said.

With stock markets reaching all-time highs, small and midcap segments continued to be favoured by investors as the category witnessed positive inflows for the 3rd consecutive month, Gautam Kalia, Head – Investment Solutions, Sharekhan by

, said.

Apart from equities, investors put in Rs 6,217 crore in hybrid funds in the month under review. This included Rs 4,521 crore in arbitrage funds.

Contribution to systematic investment plans (SIPs) were strong at Rs 8,819 crore in May compared to Rs 8,596 crore in the preceding month. Moreover, SIP folios too increased to 3.85 crore at the end of May as compared to 3.76 crore in April-end.

“Retail equity-oriented contribution continues to be on the upward trend driven by net flows predominantly in arbitrage, multicap, midcap schemes, as also smart diversification in Fund of Fund schemes which invest in foreign equities,” N S Venkatesh, Chief Executive, Amfi said.

Further, Gold exchange traded funds (ETFs) witnessed net inflow of Rs 288 crore last month, compared to Rs 680 crore in April.

On the other hand, investors pulled out Rs 44,512 crore from debt mutual funds last month after infusing over Rs 1 lakh crore in April.

Outflow in the debt category was led largely by liquid funds, which saw a withdrawal of Rs 45,447 crore, followed by overnight funds at Rs 11,573 crore.

Overall, the mutual fund industry witnessed an outflow of Rs 38,602 crore across all segments during the period under review, compared to an inflow of Rs 92,906 crore in April.

The asset under management (AUM) of the mutual fund industry rose to an all-time high of Rs 33 lakh crore in May-end from Rs 32.38 lakh crore in April-end.

“Retail SIP Accounts, SIP AUMs and SIP contribution which signifies retail activity in the mutual fund industry has seen continued upward trend for the second month this fiscal, leading to overall industry AUMs moving to record high of Rs 33.05 lakh crore and 10 crore folios,” Amfi’s Venkatesh said.

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