Inflows into Indian equity mutual funds rose 56% to an eight-month high of Rs 404.5 billion ($4.36 billion) in March, a month riven with dramatic market swings stemming from developments around the war in the Middle East, data from the Association of Mutual Funds in India showed on Friday.
The total number of contributing accounts making regular monthly investments through Systematic Investment Plans (SIPs) rose to 97.2 million, compared to 94.4 million in February, signalling strength in steady, monthly inflows from domestic retail investors. The size of flows to these plans also climbed to a record nearly Rs 321 billion in March.
"The surge in inflows reflects sustained retail engagement, financial year-end portfolio allocations and investors using recent market corrections to deploy incremental capital into equities," said Himanshu Srivastava, spokesperson of principal research at Morningstar Investment Research India.
Flows into large-cap funds rose 42% month-on-month to Rs 29.98 billion while those into mid-cap funds jumped to a record Rs 60.64 billion.
Flows into small-cap funds rose 61% to Rs 62.64 billion, the data showed.
A meaningful decline in small-caps and mid-caps has also eased valuation worries, attracting buying interest from investors, Srivastava said.
In contrast to domestic mutual fund investors, foreign portfolio investors (FPI) sold a record $12.7 billion worth of Indian shares in March, as elevated crude prices and energy supply worries due to the Iran war dampened the outlook for economic growth and corporate earnings.
The benchmarks Nifty 50 and Sensex lost 11.3% and 11.5% respectively in March, both confirming a technical correction in their worst monthly showing in six years.
The broader small-caps and mid-caps slid 10.2% and 10.9%, respectively.
As equity mutual fund inflows picked up, Gold ETFs, which recorded an all-time high Rs 240.4 billion of inflows in January, saw inflows dipping to Rs 23 billion in March.
"The current correction has improved the medium-term opportunity set in equities, as history suggests swift recoveries from geopolitical shocks once signs of normalization emerge," said analysts at ASK Investment Managers.
