Redemptions from systematic investment plan (SIP) accounts scaled a new high of Rs 14,367 crore in July, indicating investors booked profits following back-to-back months of gains in the market.
Volatility triggered by Budget announcements also played on investor sentiment.
“July 2024 saw a peak in the Nifty, which may have prompted profit-booking among investors nearing the end of their goal tenure.
"This could be one of the reasons for the higher outflows of funds accumulated through SIPs,” said Feroze Azeez, deputy CEO, Anand Rathi Wealth.
“Those who have been investing through SIP over the past few years have made handsome returns.
"Those satisfied with returns and not expecting further rally could be booking profits and also stopping SIPs,” added Sriram BKR, senior investment strategist, Geojit Financial Services.
A part of the proceeds may have moved to new fund offerings (NFOs) that were open for subscription last month, according to industry officials.
Redemptions from SIP accounts have been rising for the last few months and have been outpacing growth in gross inflows.
As a result, even as gross SIP inflows have been making new highs, net inflows have been range-bound.
In July, net SIP inflows stood at Rs 8,964 crore as against gross SIP inflows of Rs 23,332 crore.
The net inflows were only 38 per cent of the gross tally, the lowest since December 2023.
The July SIP data is in continuation with the trend seen in the first six months of FY25.
Aggregate gross inflows in the first six months of 2024 came in at Rs 1.2 trillion, 41 per cent higher than the inflows in the same period last year.
However, the net SIP inflows registered only a 25 per cent growth at Rs 52,016 crore in the same period.
According to experts, while the gross outflow has gathered some pace, investor confidence in mutual funds and the equity market remains elevated.
“SIP inflows have consistently peaked over the last 12 months, indicating strong investor confidence in the market, with equity being the preferred investment mode.
"The number of new SIPs registered has also grown consistently, with nearly 7.2 million new plans registered in July,” said Azeez.
Even as net SIP inflows have been subdued, aggregate net flows into equity mutual fund schemes have been making new highs in recent months.
According to industry officials, part of the proceeds from SIP account redemptions may also be moving to NFOs.
In June, new offerings in the active equity space collected Rs 14,370 crore, the highest in a calendar month. Last month, the NFO collection stood at Rs 13,735 crore.
In the first half of 2024, mutual funds launched 30 active equity schemes, compared to 51 in the entire 2023.
Also, NFO collection by active equity schemes in 2024 has outpaced the 2023 total, with equity NFOs raking in Rs 37,885 crore by June, surpassing the Rs 36,657 crore collected during the previous year. In 2022, 27 launches had collected Rs 29,586 crore.
