Inflows into India's equity mutual funds rose 17% sequentially to a record high of 406.08 billion rupees (about $5 billion) in June, data from the Association of Mutual Funds in India (AMFI) showed on Tuesday.
Equity mutual funds have seen net inflows aggregating to 5.99 trillion rupees from domestic investors since February 2021, well above net foreign inflows of 333.61 billion rupees over the same period.
The benchmark NSE Nifty 50 has risen about 65% over these last 40 months, helped by sustained mutual fund inflows, steady earnings and the fastest macroeconomic growth among large economies.
Inflows into large-caps rose 46% to 9.7 billion rupees, a three-month high, supported by policy continuity and macroeconomic stability.
Meanwhile, inflows into small-caps and mid-caps moderated 16% and 3%, respectively at 22.63 billion rupees and 25.28 billion rupees in June.
"Bulk of the mutual fund flows went to small- and mid-caps from large-cap funds over the last two years, as investors chased performance," said Harsha Upadhyaya, chief investment officer and president at Kotak Mahindra Asset Management.
However, valuation excesses have been more in small- and mid-caps over large-caps, which is now forcing investors to diversify their allocations to large- and multi-cap funds, Upadhyaya added.
Multi-cap or diversified equity funds, which invest across different stocks to minimise risk of exposure to few stocks, saw inflows worth 47.09 billion rupees, a 27-month high.
Sectoral or thematic funds saw the most inflows among equity mutual fund schemes for the second straight month at 223.52 billion rupees.
India's stock benchmarks Nifty 50 and BSE Sensex rose about 7% each in June, logging their best month this year so far.
The broader, more domestically small-cap gained 9.7% and 7.8%, respectively, during the same period.
Contributions to systematic investment plans (SIPs) touched a record high of 212.62 billion rupees in June, hitting an all-time high for the 12th consecutive month.
