It took 50 years to build Rs 10 lakh crore in AUM from 1963 to 2013, but in just six more years, it reached Rs 23 lakh crore by 2019. As of August 2024, the AUM has tripled to Rs 66.70 lakh crore, demonstrating strong investor confidence.
India’s mutual fund industry is seeing a significant rise in investments, with its Assets Under Management (AUM) reaching Rs 66.70 lakh crore in August 2024, as per data released by Association for Mutual Funds in India (AMFI).
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This growth has been driven by various factors, including India’s economic growth and the increasing financial literacy of investors.
According to Moody’s latest report, the country’s economic growth forecast stands at 7.2%, which has fuelled interest in investment products like mutual funds.
Over the years, mutual funds have become one of the most accessible investment options for retail investors in India.
The journey of the industry has been impressive—it took 50 years to build Rs 10 lakh crore in AUM from 1963 to 2013, but in just six more years, it reached Rs 23 lakh crore by 2019. As of August 2024, the AUM has tripled to Rs 66.70 lakh crore, demonstrating strong investor confidence.
Hitesh Thakkar, Acting CEO of ITI Mutual Fund, highlighted the growth,and said, “Mutual fund investment is a cost-effective, transparent option for retail investors to participate in India’s growth.”
According to data released by Groww, some interesting trends have emerged in August 2024.
There has been a 200 basis point (BPS) increase in inflows into large-cap funds compared to small and mid-cap funds. However, inflows into sectoral and thematic funds decreased by 15% compared to the previous month, indicating a shift in investor interest.
The overall mutual fund industry saw an increase in both equity and debt investments. Equity net inflows for August amounted to Rs 38,239 crore, marking a 3.3% rise from July’s Rs 37,113 crore.
This also made it the second-highest monthly net inflow after June 2024. Debt funds saw a net inflow increase of Rs 45,169 crore. Notably, thematic equity funds remained the most popular, attracting Rs 18,117 crore in August alone, marking the second consecutive month of strong inflows.
For the first time, the number of mutual fund folios crossed 20 crore, reflecting growing investor participation in the market. The Systematic Investment Plan (SIP) data for August is still awaited, but expectations are high due to strong equity inflows.
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Despite global uncertainties and market volatility, the data from the Association of Mutual Funds in India (AMFI) shows that domestic flows remain strong.
Deepak Ramaraju, Senior Fund Manager at Shriram Asset Management Company Ltd., said, “Even with high valuations, demand remains strong, particularly in thematic, mid, and small-cap funds.”
One notable trend in August 2024 was the shift in inflows from multi-cap funds to large-cap funds, which could be a temporary move due to valuation differences. Flexi-cap funds also saw a 12% increase in net inflows, further indicating the robust demand for equity as an asset class.
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Why are Indians betting big on SIPs?
Mutual funds, particularly through SIPs (Systematic Investment Plans), have become increasingly popular in India. In August 2024, the number of folios increased by 3.16%, reaching 14.3 crore.
This growth highlights the rising appeal of mutual funds among investors who want to take advantage of the opportunities in India’s equity markets.
One key driver behind this surge is the continuous launch of new fund offerings (NFOs). August saw the launch of six NFOs, which collectively garnered Rs 11,067 crore. Sectoral and thematic funds dominated the new launches, with five such funds raising Rs 10,202 crore, contributing to the category’s net inflows of Rs 18,117 crore for the month.
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Himanshu Srivastava, Associate Director – Manager Research at Morningstar, highlighted that NFOs continue to attract interest due to their high-risk, high-return potential. However, he urged caution, stating, “Investors should carefully assess the sectors or themes before committing funds, as not all thematic investments fit every portfolio.”
Mid and Small-Cap funds: High risk, high reward
While large-cap funds provide stability during volatile times, mid and small-cap funds are known for their high volatility. In August, net inflows into small-cap funds doubled, reflecting growing interest despite stretched valuations. Mid-cap and flexi-cap funds also saw strong inflows. However, investors need to be cautious about their exposure to these segments.
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Srivastava pointed out that while mid and small-cap funds can deliver impressive returns in a rising market, they are equally susceptible to losses in down markets. “Investors should align their exposure with their risk appetite and only invest with a long-term horizon,” he advised.
August 2024 also saw the launch of 10 passive funds, including five index funds and five ETFs, which collectively raised Rs 884 crore. This underscores the growing popularity of passive investment strategies, where investors look for low-cost options to participate in the market.
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Interestingly, the correction in the market during early August provided a buying opportunity for many investors. As a result, equity categories across the board witnessed strong net inflows. The large-cap category, in particular, saw a resurgence in net inflows as investors sought to balance their portfolios with more stable investments.
Overall, the data suggests that mutual fund investors in India are becoming more mature and confident in their investment decisions. Despite the challenges posed by global market volatility, the appeal of mutual funds remains strong, with both retail and institutional investors continuing to bet big on India’s growth story.
