Gold’s 9% Surge Drives Increased Inflows Into Cash And Debt Securities, Report Says

New Delhi witnessed a significant surge in gold prices, with an increase of over 9 percent this month, which surpasses the returns generated by broader equity markets. However, rather than reinvesting in these precious metals, investors predominantly moved their gains into safer assets. According to a report by Vallum Capital, gold inflows dropped from Rs 8,680 crore in June to Rs 4,084 crore in July, while a staggering Rs 1,40,390 crore flooded into money market funds, marking a stark contrast to last month's outflows of Rs 65,530 crore.

The immediate catalyst behind the gold price gains was the release of the US jobs report, which fell drastically below expectations. This unexpected news briefly alleviated concerns of an additional interest rate hike by the Federal Reserve. Fixed income assets also changed course, shifting from Rs 53,006 crore outflows in June to a net inflow of Rs 5,947 crore in July—a substantial swing of Rs 58,954 crore within a single month.

In India, the auto and transport sectors experienced exceptional growth, driven by the introduction of the country's first-ever 4-lakh passenger vehicle in July. On the technology front, there was a sharp recovery as global investors rotated out of Korean semiconductor stocks and into Indian software companies. Nevertheless, Rs 1,345 crore was withdrawn from technology funds despite this rebound. Healthcare also attracted Rs 737 crore in fresh investments, contributing to a 16.4 percent gain for the year.

Meanwhile, Public Sector Undertaking (PSU) banks saw a 3.8 percent increase following strong quarterly results, whereas shares of private banks fell by 4 percent, causing a widening gap between the two. Micro-cap funds emerged as the strongest performers, delivering 4.6 percent in one month, 15.9 percent YTD, and 12.7 percent over one year.

Small-cap funds returned 2.8 percent in July, 11.4 percent YTD, and 13.3 percent over one year. Large-cap funds, however, were down by 3.9 percent YTD but still managed to absorb Rs 14,977 crore in July, a rise of Rs 5,291 crore from the previous month.