Equity mutual funds saw a record inflow of Rs 12,727 crore in July primarily due to a rally in the stock markets and hopes of rate cut by the Reserve Bank.
This also marks the 16th straight month of inflows into equity schemes. Prior to that, such funds had witnessed a pullout of Rs 1,370 crore in March 2016.
The strong inflows have pushed the asset base of equity mutual funds (MFs) by more than 6 per cent to Rs 6.3 lakh crore at the end of July from Rs 5.91 lakh crore in the preceding month.
According to data from the Association of Mutual Funds in India (Amfi), equity funds, which also include equity-linked saving schemes (ELSS), saw net inflows of Rs 12,727 crore in July, higher than Rs 8,164 crore in the preceding month.
Stock markets have been on an upswing, touching new highs this year.
"The continuing rally in equity markets and hopes of a rate cut by RBI in its August 2 monetary policy meet were primary reasons for the robust inflows in equity oriented funds in July.
"Successful implementation of GST with no major business disruptions being reported, drove investors into equity mutual funds. The quarterly results have been better than expected from most businesses and this helped sentiments," Bajaj Capital Chief Executive Rahul Parikh said.
According to Vidya Bala, head of MF Research at Fundsindia.com, advertising campaigns started by markets regulator Sebi and industry body Amfi have helped in increasing penetration of mutual funds in the country.
"Decline in interest income from fixed income products such as bank FDs is attracting investors towards equity. Further, gold and real estate are not giving good returns over the past few years, making the investors move towards equity mutual funds," she said.
Bala said that Systematic Investment Plans (SIPs) have been the preferred route for many investors to invest in mutual funds. SIP is an investment vehicle that allows investors to invest in small amounts periodically instead of lumpsums. The frequency of investment is usually weekly, monthly or quarterly.