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₹23,500 cr June MF inflows: Flexicap funds win, 50% go to just 10 schemes
Flexi Cap and Midcap Schemes Dominate
The Flexi Cap category led the charge with ₹5,700 crore in inflows—the highest since July 2021. Much of this was absorbed by the Parag Parikh Flexicap Fund, which alone accounted for 12.6% of total active inflows and 50% of the category's one-year inflow. Notably, a significant portion of this fund's capital is either sitting in cash or has been deployed into primary market issuances—a key trend across MF cash movements this year.
In the midcap segment, while inflows remained in line with historical averages, around 42% of incremental capital went into just one fund—Motilal Oswal Midcap—highlighting continued fund-level concentration.
Sectoral and Thematic Funds Lose Steam
Investor enthusiasm for sectoral and thematic funds seems to be waning. The category saw modest inflows of only ₹470 crore in June. Energy funds, once popular, saw outflows of ₹740 crore—the sharpest monthly redemption in four years. Manufacturing funds faced redemptions for the seventh consecutive month, while Quant and Logistics-themed schemes also witnessed fresh selling pressure.
"The most pronounced investor enthusiasm since 2023 was seen in Manufacturing, Innovation, Business Cycle, and Infrastructure-themed funds. However, Manufacturing has already witnessed redemptions over the past few months, and inflows into other categories have also decelerated.Among sectoral funds, Energy and Infra categories have also begun to see outflows," noted the report.
Top-10 schemes take 50% of the total active inflows in Jun led by Parag Parikh Flexicap Fund (12.6%), HDFC Flexicap Fund (7.4%), Motilal Oswal Midcap Fund (5%), Bandhan Smallcap Fund (3.5%) and HDFC Focused Fund (3.3%)
Large-cap Reallocation Underway
June also saw a noticeable uptick in Large Cap allocations across scheme categories:
Midcap schemes increased their largecap exposure by 3.7%
Large & Midcap schemes added 2.4%
Flexi Cap schemes raised it by 1.1%
However, Multicap allocations remained unchanged, and Small Cap funds are already near their record largecap allocation of 7.2%. Despite these shifts, most equity schemes remain underweight on largecaps compared to long-term averages—implying further reallocation could be underway, particularly as markets stabilize.
Cash Levels Plunge—Where Did the Money Go?
A sharp drawdown in MF cash positions was one of the most significant trends in June. Overall cash levels fell to 5.5%, down from 6.3% in May and a peak of 6.8% in April. This translates to an INR 16,400 crore decline in cash, with total cash across active equity MFs now at ₹1.84 lakh crore—close to pre-COVID averages.
The capital has largely been deployed into primary market issues, including IPOs and pre-IPO placements. Historical trends suggest that such aggressive deployment phases have historically preceded both market peaks (2012, 2013, 2017) and major uptrends (2013, 2016, 2020), making this a critical signal for investors to monitor.
Notably:
Largecap schemes marginally increased cash to ₹17,580 crore.
Midcap funds saw the sharpest cash drawdown—from 7.3% to 5.3%, led by deployment from Motilal Oswal Midcap Fund.
Smallcap funds also trimmed cash from 8.3% in April to 7% in June.
What It Means for Investors
While the headline rebound in inflows signals improved sentiment, concentration risk remains high, with a few high-performing funds attracting a majority of capital. Investors should remain mindful of this trend when evaluating MF portfolios.
The aggressive cash deployment may hint at institutional bullishness, but it also means that fund managers are now more exposed to market swings. Meanwhile, fading interest in thematic and sectoral funds suggests a shift towards core diversified categories and quality stock-picking.
Key Takeaways for Investors:
Diversify across fund houses and not just top-performing schemes.
Monitor largecap exposure in your MF holdings; many funds may realign portfolios over the next quarter.
Be cautious with thematic bets, especially in funds facing sustained redemptions.
Watch for signals in cash allocation trends, which may precede market shifts.
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