By Abhirup Roy

MUMBAI (Reuters) - Inflows into India's equity mutual funds hit a record high last month, industry data showed, as ebbing COVID-19 infections, a soaring stock market and low interest rates drove confidence among investors despite warnings of a potential third wave.

Mutual funds that invest in equities showed a net inflow of 225.83 billion rupees ($3.04 billion) in July compared with an inflow of 59.88 billion rupees in June, data published by the Association of Mutual Funds in India (AMFI) showed.

"The decline of the second wave, strong recent returns from equities, and the stability of the markets despite the second wave have added to investor comfort and confidence," said Arun Kumar, head of research at online investment platform FundsIndia.

Last year, a nationwide lockdown to prevent the spread of the coronavirus and its economic impact spooked investors. Many booked profits and chose to stay away as stock markets recovered from the crash, leading to the first outflows in four years from equity funds in July 2020.

That has changed.

"A lot of investors who have accumulated higher savings in the last year due to lower spending and were staying on the sidelines are getting back," Kumar said.

India's stock markets scaled record highs last week as a slew of companies reported strong earnings and certain economic indicators led to expectation of a demand recovery. The exuberance also led to a number of new fund launches that in turn have driven flows into equity funds.

Systematic Investment Plans (SIPs), popular among retail investors for allowing investment of a fixed amount regularly in schemes, also rose to a record 96.09 billion rupees in July from 91.55 billion rupees in June.

Daily coronavirus cases in India have dipped to 30,000 to 40,000 from a high of 400,000 at the peak of the second wave. But the government has warned that the danger has not yet abated with the more infectious Delta variant straining healthcare systems in some countries.

($1 = 74.2770 Indian rupees)

(Reporting by Abhirup Roy; Editing by Steve Orlofsky)