By Bharath Rajeswaran
(Reuters) -Inflows into India’s equity mutual funds fell to a 10-month low in February, data released on Wednesday showed, with investors scurrying to safety with smallcaps and midcaps firmly in a bear grip.
Inflows fell 26% month-on-month, the steepest percentage drop since April 2023, to about 293 billion rupees ($3.4 billion), according to data from the Association of Mutual Funds in India. Flows into largecap funds fell 6% month-on-month to 29 billion rupees while those into smallcap and midcap funds slumped 34% and 36% to 37 billion rupees and 34 billion rupees, respectively. “Investors are shifting tactically, balancing market corrections while awaiting clearer macro signals,” said Karthick Jonagadla, founder and chief executive of Quantace Research. Slowing economic growth and corporate earnings, relentless foreign selling and U.S. trade policies have led to sharp falls in Indian markets over the last five months. The Nifty 50 has fallen 15% from a record high in late September while the smallcap and midcap indexes are down 24% and 21% from their all-time highs.
The smallcap and midcap indexes, more popular with retail investors, suffered their steepest falls in five years in February. In contrast, the blue-chip Nifty 50 index fell 6%. Money going into sectoral and thematic funds, which have topped flows since the start of 2024, declined 37% in February. Contribution to systematic investment plans (SIP), where investors make regular payments into funds, fell for the second straight month. The number of SIP accounts fell to 82.6 million from 83.4 million in January. “We have already seen some stoppage in SIPs due to the steep fall in markets as mean reversion of valuations is underway, with froth in small and midcaps getting corrected,” said Sanjeev Hota, vice president and head of research at wealth management at Mirae Asset Sharekhan. “This is resulting in moderation in inflows from mutual fund and retail investors.”
($1 = 87.2420 Indian rupees)
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Mrigank Dhaniwala)
