Despite this, gross inflows surged to Rs 42,160 crore, spurred by investments via the systematic investment plan (SIP) route, which saw an all-time-high contribution of Rs 16,042 crore in September.
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This upswing in redemptions is attributed to valuation concerns. Several brokerages believe valuations in the mid- and small-cap sectors have become overextended, diminishing their appeal compared to large-caps. Additionally, intense sell-offs in smallcap stocks on certain trading days likely prompted investors to offload their shares.
On September 12, 2023, the midcap and smallcap indices saw their most significant single-day drop, with the Nifty Smallcap 100 index and the Nifty Midcap 100 index declining by 4.1 per cent and 3.1 per cent, respectively.
Melvyn Santarita, an analyst at Morningstar Investment Adviser India, noted, “Despite the dip in net flows for both small-cap and mid-cap categories compared to prior months, they remained significant recipients. The decline can be attributed to profit booking and concerns over inflated valuations.”
September saw a robust start in the markets, but gains dwindled as it progressed. The Nifty 50 and Sensex indices concluded the month with gains of 2 per cent and 1.5 per cent, respectively. Concurrently, the Nifty Smallcap 100 index rose by 0.9 per cent, while the Nifty Midcap 100 index slipped by 0.1 per cent.
Supported by the market and robust SIP inflows, the mutual fund industry witnessed a 2 per cent increase in the average assets under management, reaching Rs 47.8 trillion, even as debt schemes saw over Rs 1 trillion in net outflows.
Liquid and money market schemes, which have shorter horizons, typically see pronounced outflows at each quarter’s end due to corporate advance tax payment withdrawals.
For the first half of financial year 2023-24, the industry’s average monthly AUM has surged 19 per cent to Rs 47.8 trillion, bolstered primarily by the equity market’s favourable conditions.
NS Venkatesh, Chief Executive Officer at Amfi, remarked, “The half-yearly growth is promising, and we’re optimistic about the continued growth trend. Despite global challenges, the Indian markets have remained resilient, largely driven by domestic institutional investors.”