Inflows into Indian equity mutual funds more than doubled sequentially to Rs 8637 crore ($1.05 billion) in June, data from the Association of Mutual Funds in India (AMFI) showed on Monday.
Inflows fell to a six-month low of Rs 3240 crore in May.
The rise in equity mutual fund inflows and buying by foreign portfolio investors (FPIs) in domestic equities drove an over 11 per cent surge in the Nifty 50 index in fiscal 2024 so far.
FPIs purchased equities worth over 1 trillion rupees in this period, while inflows in equity mutual funds aggregated to Rs 43211 crore.
Contributions through systematic investment plans (SIPs) - in which investors make regular payments into mutual funds - fell 0.1 per cent to Rs 14734 crore in June. Over 1.25 million new SIP accounts were opened.
"The rise in equity mutual fund inflows was aided by cooling inflation, improved macroeconomic indicators," AMFI Chief Executive NS Venkatesh said, adding that inflows in small-cap fund could continue to support the broadening of the rally in markets.
The smallcap index hit 52-week high at the end of June, while midcaps logged record high.
Among equity-oriented schemes, small-cap funds accounted for most of the investments for a ninth straight month at a record Rs 5472 crore, in contrast to outflows worth Rs 2050 crore from large-cap funds, AMFI data showed.
"Small-cap index is up more than 25 per cent with stocks rallying 50-200 per cent (since March 2023). This recent as well as robust past performance of small-cap funds has attracted more inflows in June," said Amit Kumar Gupta, founder at Fintrekk Capital.
Analysts, however, cautioned that fresh opportunities to deploy funds are getting limited as valuations continue to rise.
Equity-oriented mutual fund schemes have seen net inflows since February 2021. The average assets under management rose to 44.92 trillion rupees in June from 42.94 trillion rupees in May.