Equity mutual funds witnessed an inflow of Rs 35,943 crore in November, marking a drop of 14 per cent on a month-on-month basis, amid heightened volatility in stock markets driven by various macroeconomic factors, geopolitical events and US election results.

Despite this, it marked the 45th consecutive month of net inflows into equity-oriented funds, reflecting the growing popularity of mutual funds among investors, according to data from the Association of Mutual Funds in India (AMFI) released on Tuesday.

Moreover, monthly contributions from the Systematic Investment Plan (SIP) remained flat at Rs 25,320 crore last month against Rs 25,323 crore in October.

"There was heightened volatility due to various macroeconomic factors, geopolitical events and the US election results. This resulted in investors opting for a wait & watch approach while allocating larger amounts and thus decline in lumpsum flows including flattish SIP numbers for November 2024," Akhil Chaturvedi, CBO, Motilal Oswal AMC, said.

Overall, the mutual fund industry experienced an inflow of Rs 60,295 crore in the month under review, which was way lower than Rs 2.4 lakh crore in October. This could be due to a huge decline in inflows in debt funds to Rs 12,915 crore in November from Rs 1.57 lakh crore in the preceding month.

Despite the decline, the industry's net assets under management rose to Rs 68.08 lakh crore last month from Rs 67.25 lakh crore in October.

"Defying a tumultuous month in the equity market, the mutual fund industry's assets reached a new pinnacle of Rs 68.08 lakh crore, driven primarily by robust inflows into growth-/equity-oriented schemes. The unwavering monthly SIP inflows remained above Rs 25,000 crore in November, showcasing the investors' long-term vision and commitment to their financial goals, despite the short-term market fluctuations," Venkat Chalasani, Chief Executive, AMFI, said.

As per the data, equity-oriented schemes witnessed an inflow of Rs 35,943 crore in November as compared to record inflow of Rs 41,887 crore in October.

"Weak global cues, China’s recent economic stimulus, and escalating tensions between Ukraine and Russia impacted Indian equity markets in November 2024, which witnessed relentless selling by foreign portfolio investors. The impact of this was seen on the Indian mutual fund industry as well, which witnessed 14.19 per cent drop in equity inflows in November on a month-on-month basis," Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, said.

Within the equity schemes, sectoral or thematic category attracted investors with the highest net inflow of Rs 7,658 crore during the month under review. However, flow in the segment was less compared to Rs 12,279 crore in October and Rs 13,255 crore in September. This was followed by flexi cap funds which saw inflow of Rs 5,084 crore last month.

Inflows into large-cap funds declined 26 per cent to Rs 2,548 crore in November from Rs 3,452 crore in the preceding month, while mid and small cap funds registered month-on-month growth of 4.3 per cent to Rs 4,883 crore and 9 per cent to Rs 4,112 crore, respectively.

The month saw 18 new fund offerings (NFOs) collecting Rs 4,052 crore while October saw 29 NFOs garnering Rs 6,078 crore. Of this, new index funds launched in November were 10 as compared to 17 launched in October, Mayukh Datta, Chief Business Officer, ITI Mutual Fund, said.

There has been a shift from low-risk categories like large-cap and hybrid funds to higher-risk options like small-cap funds, while NFO activity slowed down last month.

With regards to debt-oriented funds, Deepak Ramaraju, Senior Fund Manager, Shriram AMC, said that the category saw a 92 per cent month-on month plunge in inflow to Rs 12,916 crore in November on the back of withdrawal from liquid funds due to tighter liquidity conditions and possible tax payments.

Overall, 9 out of 16 debt mutual fund categories recorded net inflows in November. Liquid funds experienced the highest outflows, amounting to Rs 1,779 crore.

"Meanwhile, investors showed a strong preference for categories like low-duration funds, ultra-short-duration funds, money market funds, corporate bond funds, and overnight funds. Together, these categories accounted for about 85 percent of the inflows across nine categories that recorded positive figures, highlighting a strong preference for low-risk, highly liquid investment options," Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India, said.

Further, investor interest in active duration strategies, such as Gilt Funds, led to inflow of Rs 1,803 crore. This can be attributed to rising expectations of interest rate cuts in the near future, she added.

Gold continues to glitter with investors showing their affinity towards yellow metal in November as well. Gold ETF category witnessed a net inflow of Rs 1,257 crore in November, which was lower than Rs 1,961 crore seen in the preceding month.

"While the fund mobilized was less compared to October, the redemption number was higher. This signifies that investors would have chosen to book profits with gold trading at elevated levels and impending marriage season, where the demand for physical gold is high," Himanshu Srivastava – Associate Director- Manager Research, Morningstar Investment Research India, said.

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