Equity mutual fund inflows fall 14% in October as investors trim smallcap exposure

Mumbai: Inflows into equity mutual fund schemes declined 14% in October, as stocks remained subdued through the first three weeks, with investors trimming allocations to smallcaps and several other categories. Large and midcap funds, however, witnessed a sharp increase in investments,

Net inflows into equity-oriented mutual fund schemes stood at ₹32,993 crore in October, compared with ₹38,306 crore in September, according to data released by the Association of Mutual Funds in India (AMFI). Smallcap funds, which were the second-largest recipients of equity investments in September, saw inflows decline 29% to ₹6,407 crore in October from ₹9,038 crore in the previous month.

Large and midcap funds emerged as the biggest beneficiaries, recording inflows worth ₹8,484 crore last month, nearly double the ₹4,271 crore received in September.


Large cap funds also recorded a 20% increase in monthly inflows, while most other equity categories witnessed a decline. Mid-cap fund inflows fell to ₹4,892.62 crore from ₹7,834.84 crore recorded a month ago. The moderation in equity investments came amid market volatility, even as the Sensex and Nifty gained 2.7% and 1.9%, respectively during October. "The moderation could be attributed to some cooling in investor appetite for relatively riskier market segments, alongside a cautious approach amid market volatility, valuation concerns and global uncertainties," said Himanshu Srivastava, principal, Manager Research, Morningstar Investment Research India.

Read more: Debt mutual funds see sharp recovery in October as quarter-end outflows reverse

Indian investors have matured over the years and increasingly treat volatility as part of the investment journey. The recent rally has shown once again that time in the market matters far more than timing the market, said Navneet Munot, MD & CEO, HDFC AMC.

Systematic investment plan (SIP) contributions also fell nearly 1% during the month, alongside a reduction in contributing accounts. Total inflows through SIPs fell to ₹32,160 crore in October, compared with ₹32,490 crore in September and ₹32,297 crore in August, according to the AMFI data.

Read more: Smallcap mutual fund inflows drop 29% MoM to Rs 6,407 crore in October. Should investors be cautious or continue investing?

The slowdown in SIP contributions was accompanied by a rise in the stoppage ratio, which climbed to around 116% in October from 78.5% in September. Nearly 59 lakh SIP accounts either matured or were discontinued during the month, up from 49.68 lakh in September. Fresh registrations, meanwhile, dropped to about 51 lakh from 63.26 lakh in the previous month.

On the debt front, schemes witnessed a strong reversal in flows, attracting ₹1.13 lakh crore in October after recording net outflows for two consecutive months. Debt funds had seen withdrawals of ₹1.83 lakh crore in September and ₹8,127 crore in August. Liquid funds attracted the highest investments at ₹70,533 crore, reversing an outflow of ₹95,743 crore in September. Overnight funds received ₹54,893 crore, against an outflow in the previous month.

According to fund managers, the rebound was driven by liquidity-oriented categories, suggesting a reversal of quarter-end treasury adjustments and a redeployment of surplus corporate and institutional cash into short-term debt instruments. Ultra-short to short-duration funds recorded the highest outflows at ₹3,581 crore.