IGI Logo

Inflows into India's equity mutual funds rose in October as investors continued to prefer small- and mid-cap funds on hopes of strong returns, data from the Association of Mutual Funds in India (AMFI) showed on Thursday.

Inflows into equity mutual funds rose 41.63% month-on-month to 199.57 billion rupees in October, the data showed.

This is the 32nd consecutive month of inflows on a net basis. Domestic investors had bought shares worth 140.91 billion rupees in September.

The sustained buying limited losses in the markets stemming from foreign investors selling equities worth 245.48 billion rupees, the most since January, due to elevated U.S. Treasury yields.

The benchmark Nifty 50 lost nearly 3% in October, its worst month in 2023 so far.

"The influence of foreign inflows in Indian markets have gradually reduced over time," said Pramod Gubbi, founder of Marcellus Investment Managers.

"Domestic inflows have consistently remained strong and the average Indian investor is increasingly becoming active in stock markets, both through investments in funds and direct investing," he added.

Small-cap funds accounted for most of the investments for the 13th straight month at 44.95 billion rupees, over six times the inflows of 7.24 billion rupees into large-caps.

Mid-caps received inflows worth 24.09 billion rupees, compared with 20.01 billion rupees in September.

The small-cap and mid-cap indexes have jumped 37% and 29% so far this year, far outperforming a 7% gain in Nifty 50.

"The inflows into small-caps is because retail investors believe that there is still juice in the segment," said NS Venkatesh, CEO of AMFI, noting that "some mutual funds have restricted inflows into small-cap schemes."

Analysts said investors should be cautious about hiking allocations into small-caps, given the recent rally and volatility in markets.

Contributions into systematic investment plans (SIPs) - in which investors make regular payments into mutual funds - hit a record high of 169.28 billion rupees.