SIP contributions remained steady at ₹28,265 crore versus ₹28,464 crore a month earlier.
Why flows moderated in August?
Industry executives pointed to two key reasons for the slowdown: fewer new fund offers (NFOs) and lower arbitrage flows.
DP Singh, Deputy MD & Joint CEO at SBI Mutual Fund, said August saw fewer NFO mobilisations compared with July and reduced participation in arbitrage funds, which also weighed on hybrid flows.
Akhil Chaturvedi, Executive Director and Chief Business Officer at Motilal Oswal AMC, added that while the overall flow momentum remained healthy, the NFO pipeline was softer due to market volatility.
“The lower impact of new flow viz previous month roughly ₹9,000 crore is to the extent of NFOs which were higher in July than August. Rest the flow momentum is steady and healthy,” he said.
SIP resilience and retail participation
Despite global headwinds and foreign investor selling, retail investors continued to allocate to equities through SIPs.
Chaturvedi highlighted that SIP numbers are now steady around ₹27,000–28,000 crore and could see incremental gains of ₹1,000–1,500 crore each month.
“Broadly, Indian investors continue to add equities to their allocation despite global headwinds and FII selling, and this is very positive for the markets,” he said.
Allocation trends: tilt towards mid- and small-caps
Within equity categories, flexi-cap funds led inflows at ₹7,679 crore in August, surpassing July’s record of ₹7,654 crore. Mid-cap and small-cap funds also sustained strong interest, garnering ₹5,331 crore and ₹4,993 crore respectively.
Large-cap funds attracted ₹2,835 crore, higher than July’s ₹2,125 crore but still lagging behind mid- and small-cap categories in investor preference.
This divergence in allocation is raising concerns among market watchers.
Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, pointed out that mid- and small-cap schemes now command AUM levels close to or exceeding large-cap schemes.
“This makes it clear that there is overallocation by retail into the midcap and smallcap categories. The AUM data as well as the PE data clearly shows that there is overallocation to the midcaps and smallcaps and underallocation to largecaps,” he cautioned.
Sectoral and thematic funds moderate after July surge
Sectoral/thematic funds, which had seen record inflows of ₹9,426 crore in July, slowed to ₹3,893 crore in August, including contributions from two new fund launches.
Analysts said the moderation reflects investor caution towards the cyclical nature of such strategies and some profit booking after aggressive allocations in July.
The bigger picture
Himanshu Srivastava – Principal, Manager Research, Morningstar Investment Research India, noted that despite the slowdown versus July, the ₹33,417 crore inflow in August highlights sustained confidence in equities.
He said retail investors were consistent in allocations through SIPs, aided by optimism around India’s economic outlook, corporate earnings recovery, and intermittent market corrections that provided attractive entry points.