15 equity NFO launches in July, thematic funds continue to steal show

 July witnessed the launch of 15 new fund offerings which cumulatively garnered Rs 16,565 crore. Of these, three were in the equity-oriented asset class garnering Rs 14,735 crore and 12 were passive funds (6 index funds and 6 Other ETFs) which garnered Rs 2,830 crore, shows data analysed by Morningstar. 

Sector/thematic funds continue to attract investor attention as they witnessed highest net inflows of  Rs 18,386 crore in July 2024,  which is the third-highest the category has witnessed over a month. The category was aided by the launch of two new fund offerings (viz Edelweiss Business Cycle Fund; ICICI Prudential Energy Opportunities Fund) which cumulatively garnered Rs 9,790 crore.

 

The multi-cap category witnessed the second highest net inflows in July 2024 among the equity-oriented categories amounting to Rs 7,084 crore which was its third highest net inflows ever over a monthly period. The category was also aided by the launch of Franklin India Multi Cap Fund in July, which garnered Rs 3,945 crore.

"Multicap funds have consistently attracted more inflows over the past three months, reaching Rs 7,080 crore in Jul 24. Midcap funds, however, saw slower inflows this month, while small caps brought in nearly the same amount as in June 2024, around Rs 2,000 crore. Surprisingly, large-cap funds haven't seen higher inflows compared to June 2024, but dividend yield funds, which are large-cap oriented, recorded comparatively higher inflows at Rs 630 crore against Rs 520 Cr last month," said  Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited.

Categories that are biased towards the large-caps segment like Large & Midcaps (Rs 2,622 crore), Flexicap (Rs 3,052 crore) and Value (Rs 2,170 crore) saw robust inflows during the month.

" While markets have been in a prolonged bull run, there are concerns about overvaluations in certain areas, particularly in the mid and small-cap segments. Consequently, investors may be opting to invest in large-cap segments, where valuations are more favorable. Notably, the value/contra category experienced its second-highest net inflows on a monthly basis," said Melvyn Santarita, Analyst – Manager Research, Morningstar Investment Research India.

Investors also continued to invest in mid and small-cap funds with net inflows of Rs 1,644 crore and Rs 2,109 crore, respectively. 

"While these are still substantial numbers for these segments, the net inflows towards both these segments have been tapering down perhaps given the concerns on valuations. It is important for investors to note that mid and small cap segments are highly volatile. While they can give exceptionally high return in up markets, they can fall equally hard in down markets. Therefore, investors should take exposure in these funds in line with their risk appetite and invest only with a long-term investment horizon," cautioned Santarita.

In all, equity oriented funds witnessed a robust net inflow of Rs 37,113 crore in July 2024, which was around 8.6% lower than the net inflows witnessed in June 2024- Rs 40,608 crore. Despite the dip in net inflows, the quantum of net inflows witnessed in July 2024 was the second-highest flows ever received in a monthly period second only to the flows in June 2024. Interestingly, equities as an asset class haven’t witnessed net outflows in over 41 months.

The only categories that witnessed net outflows were ELSS (Rs 637 crore) and Focused Fund (Rs 620 crore). Both categories witnessed net outflows for the fourth consecutive month.

"“In July 2024, equity inflows declined by 9% to Rs 37,113.39 crore, yet the positive trend continues for 41 months, reflecting strong investor confidence. Sectoral/thematic funds contributed Rs 18,386.35 crore, while Multi-cap funds attracted Rs 7,084.61 crore, indicating a shift in investor preference towards categories with higher alpha potential," said Pankaj Shrestha, Head - Investment Services, PL Capital - Prabhudas Lilladher.