In August, India’s mutual fund industry has achieved a significant milestone. As per the latest AMFI reports, assets under management (AUM) surpassed Rs 65 lakh crore for the first time. Equity mutual funds, particularly small-cap and mid-cap categories, attracted strong inflows amounting to Rs 38,239 crore. This, indeed is driven by consistent demand. This marks the 42nd consecutive month of positive inflows into open-ended equity funds.
What is driving the growth in the assets of mutual funds?
Let us take a look!
Mutual Fund Industry Update- August 2024
| Category | Changes and Latest Status (August 2024) |
| Mutual Fund Industry AUM | Crossed Rs 65 lakh crore for the first time, reaching Rs 66.70 lakh crore. |
| Equity Fund Inflows | Increased by 3.03% to Rs 38,239.16 crore. |
| Mutual Fun SIP Contributions | Reached a record high of Rs 23,547 crore, up from Rs 23,332 crore in July. |
| Small-Cap Fund Inflows | Jumped 52% to Rs 3,209.33 crore. |
| Mid-Cap Fund Inflows | Zoomed 86% to Rs 3,054.68 crore. |
| Large-Cap Fund Inflows | Increased by 293% to Rs 2,636.86 crore. |
| Multi-Cap Fund Inflows | Slumped 65% to Rs 2,475.06 crore. |
| Thematic/Sectoral Fund Inflows | Strong inflows of Rs 18,117.18 crore, with Rs 10,202 crore from NFOs. |
| Debt Fund Inflows | Decreased to Rs 45,169.36 crore from Rs 1,19,588 crore in July. |
| Ultra Short Duration Fund Inflows | Dropped 92% to Rs 695.62 crore. |
| Dynamic Asset Allocation Fund Inflows | Increased by 79% to Rs 3,215.06 crore. |
| Index Fund Inflows | Dropped 60% to Rs 3,247.24 crore. |
| Gold ETF Inflows | Increased by 20% to Rs 1,611.38 crore. |
| Fund of Funds (Overseas) Outflows | Net outflows of Rs 352.83 crore. |
| Overall Open-Ended Mutual Fund Inflows | Total inflows stood at Rs 1,08,240.95 crore. |
This table provides an overview of the key changes in inflows and outflows for various mutual fund categories during August 2024.
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Positive Trends in Equity Funds
Inflows into open-ended equity mutual funds increased by 3.03% in August, reaching Rs 38,239.16 crore. This rise was driven by high demand for small-cap and mid-cap funds. The equity markets showed modest performance, with the NSE Nifty 50 rising by 1.14% and the BSE Sensex increasing by 0.76%. Despite this, equity fund inflows remained robust.
The mutual fund AUM at the end of the month stood at Rs 66.70 lakh crore. This comes as open-ended equity funds continued their positive streak.
Performance of Small-Cap and Mid-Cap Funds
Small-Cap Funds invest in smaller companies with high growth potential but also higher risk. Mid-Cap Funds focus on medium-sized companies with steady growth prospects. However, the large cap funds invest in well-established, large companies. They tend to be less volatile and provide steady, long-term returns.
As per the mutual funds industry report- August 2024:
- Investments in small-cap funds increased by 52% to Rs 3,209.33 crore.
- On the other hand, mid-cap funds saw a dramatic 86% increase to Rs 3,054.68 crore.
- Large-cap funds also experienced substantial growth, with net inflows rising 293% to Rs 2,636.86 crore. Conversely, multi-cap funds, which invest across various stock categories, saw a 65% decrease in inflows, totaling Rs 2,475.06 crore.
As per the latest insights from AMFI, Sectoral and thematic schemes have seen strong inflows due to new fund offers (NFOs). NFOs are becoming a preferred choice for investors looking to make lump sum allocations to mutual funds.
Thematic and sectoral funds saw significant inflows of Rs 18,117.18 crore in August. This again is largely due to five new funds in this category collecting Rs 10,202 crore during the month.
Hybrid Funds Update
Hybrid funds invest in both stocks and bonds, offering a mix of growth and stability. They aim to balance risk and reward by diversifying investments across different asset classes.
Inflows into hybrid funds, which invest across multiple asset classes, fell by 43% to Rs 10,005.30 crore in August. Arbitrage funds saw a 78% decline in inflows, while Multi Asset Allocation Funds experienced a 10% dip.
However, Dynamic Asset Allocation/Balanced Advantage Funds saw a 79% increase, reaching Rs 3,215.06 crore.
Debt Funds Performance
Debt funds invest in fixed-income securities like bonds, government securities, or corporate debt. They are considered safer than equity funds and provide regular returns with lower risk.
In the debt fund category, net inflows totalled Rs 45,169.36 crore in August, down from Rs 1,19,588 crore in July. Ultra Short Duration Funds experienced a 92% decrease in inflows, while inflows into Banking and PSU Funds rose to Rs 1,549.99 crore. On a positive note, overnight funds saw a 239% increase in inflows, reaching Rs 15,105.93 crore, and Gilt Funds saw a 51% rise to Rs 1,902.09 crore.
Gilt Funds and related categories are expected to benefit from potential interest rate cuts.
Additional Fund Categories
Among passive funds, index funds saw a 60% decrease in net inflows, totaling Rs 3,247.24 crore. Gold exchange-traded funds, however, saw net inflows of Rs 1,611.38 crore, a 20% increase from the previous month. The fund of funds investing overseas experienced net outflows of Rs 352.83 crore.
Conclusion
The continued rise in equity fund inflows alongwith the mutual fund industry crossing the Rs 65 lakh crore mark, reflects positive nature. As systematic investment plans (SIPs) hit new highs, it’s clear that mutual funds remain a preferred choice for wealth creation.
Source: MoneyControl
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