Inflows into equity mutual funds touched a record high of ₹34,697 crore in May, a whopping 83 per cent rise over the net inflows of ₹18,917 crore in the previous month.

Systematic investment plans (SIPs), which largely comprises retail money, saw inflows of ₹20,904 crore in May against ₹20,371 crore in April. This was the second consecutive month inflows were over the ₹20,000-crore mark, according to the Association of Mutual Funds in India (Amfi)

In all, the mutual fund industry saw an inflow of ₹1.1 lakh crore in the month compared with ₹2.4 lakh crore in April. The record inflows into equity mutual funds came at a time the secondary markets were volatile amid the general elections.

Observers said the number not only showed the confidence of retail investors in equities but also their maturity as they have been taking exposure even when the markets were under pressure.

“It is encouraging to see that the equity mutual Fund assets under management (AUM) has surged past the ₹30,000-crore level for the first time, given that this number was around ₹18,917 crore in April 2024. This net flow has been higher than the monthly highs of January and February 2024,” Seemant Shukla, chief business officer, JM Financial Asset Management, said.

“Well timed NFOs along with the rally in markets and the long-term belief in the India growth story by the domestic retail investor, seems to have fuelled this rally.’’

Barring the focused and equity-linked saving schemes (ELSS) categories, all the other segments witnessed good net inflows. Sector or thematic funds saw the highest net inflows of ₹19,213 crore during the month, largely owing to the new fund offering of HDFC Manufacturing Fund, which garnered around ₹9,563 crore.

The small-cap category witnessed flows of ₹2,724 crore in May, a growth of almost 23 per cent compared with April. On the other hand, the investment into large-cap funds was relatively muted.

Himanshu Srivastava, associate director — manager research at Morningstar Investment Research India — pointed out that intermittent corrections gave investors some buying opportunity in the market. “Moreover, the expectation of the NDA-led government coming back to power also propelled buying from investor,” he added.

Nomination rule

Sebi on Monday eased rules for existing investors by abolishing the norm of freezing demat accounts and mutual fund folios in case of failure to provide a ‘choice of nomination’. Earlier, the regulator set June 30, 2024, as the deadline for all existing individual mutual fund holders to nominate or opt out of nomination. Failure to comply with the rule could have led to a freeze on withdrawals.

Derivatives play

Sebi has proposed stricter norms for the entry of individual stocks in the derivatives segment. The new proposal would weed out stocks with consistently low turnover from the Futures & Option (F&O) segment of the bourses.