Over 25 per cent (more than Rs 6,000 crore) of the net flows have been directed toward the large-cap category as investors preferred to put money in the top 100 stocks by market capitalisation because the segment has been the most resilient over the past year.
"The incumbent government's efforts have also led to most of the new money being allocated to the large-cap category. Some of the government's policy changes, including the rollback of FPI surcharge, corporate tax cut, PSU recapitalisation, and anticipation of reforms have also aided in ensuring a steady stream into large-cap funds," the report noted.
Overall, the equity category witnessed net flows averaging at over Rs 25,000 crore between between April 2018 and December 2018.
Post that, there was a sharp drop in the money infusion in the quarter ended March 2019 to Rs 17,876 crore. This trend seemed to have continued into the following quarter with fund flows of around Rs 17,680 crore in June quarter 2019, it said.
However, the equity category witnessed a surge in inflow in September quarter with the segment attracting flows to the tune of Rs 23,874 crore.
Significant corrections in some of the mid-cap and small-cap stocks and broader index, sell-off by foreign portfolio investors (FPIs) owing to market uncertainty, and liquidity concerns in small- and mid-cap companies seem to have impacted overall flows in equity mutual funds, the report noted.
"Having said that, mutual funds continue to hold fort with the help of a strong systematic investment plan (SIP) book," it added.
SIP is an investment vehicle that allows investors to invest small amounts periodically instead of lump sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.
Overall, mutual fund flows have been growing consecutively for the past three quarters. Net inflow was Rs 46,578 crore for the September quarter, an increase of 10 per cent compared to Rs 42,357 crore in June quarter.
On the domestic front, markets have remained extremely polarised over the past quarter.
Despite an overall slowdown, the BSE Sensex experienced a massive run-up and crossed the 40,000 threshold on June 3, 2019, owing to a fall in crude oil prices and expectations of government reforms, such as an interest rate cut.
Besides, a euphoria around reduction of corporate taxes was another major factor that led to an upswing in the markets, the report said.
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