The mutual fund industry saw a net outflow of Rs 66191.59 crore in September as corporates and banks withdrew from debt funds for tax payments and treasury management.

Among retail investors, there is a shift towards more aggressive allocation with equity inflows on the rise, particularly in mid and small-cap funds. Outflow from debt funds was Rs 1,01,511.82 crore, with liquid funds outflow of Rs 74,176.55 crore being the highest in the category.

Equity funds in contrast saw a net inflow of Rs 14,091.26 crore, while hybrid schemes saw an inflow of Rs 18,650.45 crore, data compiled by Amfi showed.

“While overall net flows experienced a dip in various categories, thematic/sectoral funds extended their positive trend into the current month, attracting highest net inflows. Following closely were small-cap funds and multi-cap funds. However, small-cap funds witnessed a decline month on month, which can be attributed to certain fund houses temporarily halting inflows, possibly due to concerns about rich valuations in mid and small-cap space,” said Akhil Chaturvedi, chief business officer, Motilal Oswal Asset Management Company.

“Despite foreign portfolio investors turning pessimistic towards equity for the first time in months due to US yield increase and global challenges, equity remains a magnet for inflow, signalling a sustained shift in Indian investors’ risk appetite.

The move towards aggressive risk allocation is evident in the heavy outflow from debt funds, particularly pure debt funds, while hybrid funds experienced a windfall of inflows,” said Kislay Upadhyay, smallcase manager and founder of FidelFolio investments.

“The mutual fund industry crossing the 4 crore unique investors mark is a testament to India retail investors’ participation in equity markets through mutual fund route. This is further demonstrated by the SIP contribution of Rs 16,042.06 crore in September which is the highest till date,” said NS Venkatesh, CEO, Amfi.

“Small-cap and mid-cap funds continue to receive huge net inflows at Rs 2678.47 crore and Rs 2000.88 crore while large-cap funds are still witnessing net outflows. Although the trend continues, the pace has become slower with net outflow in the large-cap funds being the lowest last 5 months. Hybrid funds have received a net inflow of Rs 18650.45 crore, the highest in over two years mainly due to continuance of rising interest in arbitrage funds since last 3 months,” said Viraj Gandhi, CEO, Samco MF.

The net assets under management for the mutual fund industry was Rs 46,57,755.22 crores for September 2023, a growth of 21.22 per cent over Rs 38,42,350.73 crore in September 2022. A total of 16 schemes were launched in September raising a total of Rs 7795 crores. This aided the mutual fund folios reaching an all-time high of 15,70,96,187 in September.