As we step into a new year, the Indian mutual fund industry has set its sights on a monumental achievement – the coveted Rs 100 lakh crore AUM mark. The recent milestone of surpassing Rs 50 lakh crore in net assets under management (AUM) for the first time underscores the industry’s resilience and its pivotal role in fostering long-term wealth creation.
The remarkable growth trajectory is a testament to the trust investors place in mutual funds as a low-cost, long-term wealth creation avenue. The Association of Mutual Funds in India (AMFI) reported a net AUM of Rs 51,09,071.8 crore at the end of December 2023, reflecting the robustness of the India growth story.
December 2023 witnessed an influx of approximately ₹17,000 crore into equity mutual funds, marking a dynamic shift in investor sentiment. Small-cap mutual funds led the charge, attracting nearly ₹3,857 crore, signaling a growing appetite for higher-risk investments. In contrast, mid-cap funds faced a dip, dwindling from ₹2,665 crore in November to ₹1,393 crore in December.
The systematic investment plan (SIP) reached an unprecedented high, recording a monthly inflow of ₹17,610 crore. This surge in SIP contributions, coupled with a diverse range of fund options, reinforces the industry’s appeal as a wealth-building avenue.
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Equity investment continued its upward trajectory, with ₹4,259 crore flowing into sectoral funds. Despite a reduction in mid-cap fund inflows, overall momentum remained intact, fueled by lower inflationary pressure and a flourishing economy.
Hybrid mutual funds experienced robust inflows, totaling ₹15,009 crore. Arbitrage funds took the lead with ₹10,645 crore, showcasing investors’ inclination towards the category post change in taxation of liquid funds. Equity savings and multi-asset allocation funds attracted ₹1,080 crore and ₹2,420 crore, respectively. Index funds recorded an inflow of ₹703 crore, while gold ETFs received ₹88 crore, reflecting diversification preferences.
The industry also witnessed a surge in popularity, with the total number of folios reaching an all-time high of 16,48,90,272 in December 2023. SIP contributions hit a record ₹17,610.16 crores, with an unprecedented 7,63,65,924 SIP accounts and a corresponding SIP AUM of ₹9,95,925.39 crores. This surge in SIP accounts emphasizes the retail investor’s growing role in shaping the industry’s trajectory.
December 2023 saw 21 new fund offers raising ₹9,872 crore, spanning open-ended and closed-ended schemes, sectoral/thematic funds, hybrid funds, a children’s fund, index funds, and a fund of funds investing overseas. This influx of new options underscores the industry’s commitment to catering to diverse investor needs.
In the midst of these developments, mid-cap mutual funds have emerged as a focal point for 2024, with top managers delivering stellar one-year returns, outperforming benchmarks like Nifty Midcap 50 and S&P BSE MID CAP. While mid-cap funds inherently carry risks, these returns underscore their potential for investors seeking growth opportunities. Prospective investors are advised to carefully assess individual fund performances and align them with their risk appetites when diversifying portfolios.
Adding to the industry’s vibrancy, Parag Parikh Mutual Fund, Motilal Oswal Mutual Fund, and WhiteOak Capital Mutual Fund have filed draft documents for new funds. Parag Parikh Dynamic Asset Allocation Fund aims to generate income and long-term capital appreciation through dynamic allocation between equity and fixed-income instruments. Motilal Oswal’s draft documents feature two ETFs – Nifty IT ETF and Nifty Bank ETF, replicating/tracking their respective indices. WhiteOak Capital’s Pharma and Healthcare Fund, benchmarked against S&P BSE Healthcare TRI, focuses on long-term capital appreciation through investments in the pharma and healthcare sector.
In a strategic move, Navi Mutual Fund has renamed two hybrid schemes, with Navi Regular Savings Fund now known as Navi Conservative Hybrid Fund, and Navi Equity Hybrid Fund rebranded as Navi Aggressive Hybrid Fund, effective from January 1.
As we navigate the evolving landscape of the Indian mutual fund industry, the amalgamation of innovation, growing investor trust, and diverse fund offerings propels us toward the imminent milestone of Rs 100 lakh crore AUM. The journey promises not only financial growth but also a deeper integration of mutual funds into the fabric of wealth creation for millions of investors across the nation.
(By Rishabh Goel, MD, Tailwind Financial Services. Views are personal)
