The Mutual fund Industry has been seeing robust inflows and crossed the Rs 50 lakh crore mark in December 2023 and it marks 34 months of positive equity inflows, starting from March 2021. Backed by strong macroeconomic fundamentals and resilient earnings growth, the tempo and pace of investment is expected to remain buoyant going forward. With Mutual Fund folios reaching an all-time high of 16,48,90,272 in December and SIP contribution at an all-time high of ₹ 17,610.16 crores, the number of SIP accounts stood at highest ever 7,63,65,924 in December 2023.
Highlighting the trend, Ashwini Kumar, Head Market Data, ICRA Analytics pointed out that he expects good inflows in the coming months if interest rates in the country softens over the year and global crude oil prices continue to remain at lower levels, “The AUM of the domestic mutual fund industry, which has crossed the historic Rs 50 lakh crore mark in December 2023, is well on track to achieve the targeted aim of Rs 100 lakh crore in the next few years. Strong macroeconomic fundamentals of the Indian economy coupled with the possibility of an interest rate cut by the Reserve Bank of India if inflation remains under control, are some of the key factors that are expected to aid market sentiments moving forward. Theme based funds, particularly relating to infrastructure, healthcare and IT, have been gaining steady traction and the trend is likely to sustain moving forward backed by the government’s increased thrust on these sectors.”
In the month of September, the equity markets experienced a notable shift towards a risk-off sentiment, following the all-time high of 20,200 points. Despite this shift, equity mutual funds continued to exhibit resilience, recording a significant net inflow of Rs 14,091 crores, a slight dip from the Rs 20,245 crores observed in August. Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMO Asset Management Asset Management Company added that, “While overall net flows experienced a dip in various categories, it’s noteworthy that thematic/sectoral funds extended their positive trend into the current month, attracting the highest net inflows. Following closely were small cap funds and multicap funds. However, small cap flows did witness a decline month on month, which can be attributed to certain fund houses temporarily halting inflows, possibly due to concerns about rich valuations in the mid and small cap space. Hybrid funds experienced an uptick in net inflows on a month-on-month basis.”
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According to Chaturvedi, “this trend reflects the prevalent risk-off sentiment in the market, with investors seeking to diversify their investments while maintaining a focus on capital protection.” But G. Pradeepkumar, CEO, Union Asset Management Company reiterated that, “The sustained robust inflows into equity funds demonstrate the underlying positive sentiments of investors. The SIP flows continue to be good and could act as a powerful counterforce against any serious FPI outflows. However, given the rich valuations in mid and small cap stocks, we would advise investors to take a staggered approach to investments.”
