Mutual fund inflows into Indian stock funds declined to the lowest since May even as the $2.1 trillion equity market rose for the second straight month in October. Stock plans received ₹6,020 crore ($844 million) last month, according to the Association of Mutual Funds in India. That’s 9% less than what they got in September and the smallest inflow since May.

While India’s key equity indexes have risen to records this month on optimism over better-than-expected company earnings, the rally has yet to spread to the broader market where retail investors typically focus. The gains also don’t square with ground realities, as large parts of the country’s economy still appear to be in distress.

Cooling Off

“Markets are high but the same is not being reflected in broad category of funds," said Vidya Bala, head of research and co-founder at Chennai-based Primeinvestor.in. “Economic indicators must turn positive and the rally should start reflecting in the broader market for investors to develop confidence."

Still, monthly contributions through SIPs from investors into stock funds remained steady for the third straight month at about ₹8,000 crore, AMFI data showed.

“We expect the stock market to do well and corporate earnings to be better, and as such equity funds should do reasonably well," said N.S. Venkatesh, chief executive officer at the AMFI. “We have maintained a steady momentum of flows from the retail investors."

Overall, the industry saw an inflow of ₹1.33 trillion across all fund products, compared with an outflow of ₹1.51 trillion in September. The liquid or money market category contributed the most to the total inflows.

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