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Below the Perspective on AMFI Data by Narender Singh, smallcase Manager and Founder of Growth Investing 

Mutual Fund Industry Key Update – May 2025: Trends That Speak Volumes

India’s mutual fund industry continues its upward march, with fresh data from May 2025 showing steady growth—and some clear shifts in investor behavior. Let’s break it down with key month-on-month (MoM) and year-on-year (YoY) comparisons:

1. AUM Keeps Growing—Slow and Steady Wins the Race

Total assets under management (AUM) hit Rs.72.19 lakh crore in May 2025. That’s a modest 0.5% increase from April—but a strong 12% jump over May 2024. Open-ended schemes continue to dominate, making up 99.6% of the total AUM, proving their lasting appeal to investors.

2. Where the Money Moved: Scheme-Wise Flows

* Debt Funds:

May saw net outflows of Rs.15,908 crore, up 28% from April’s Rs.12,385 crore. Compared to last year, when debt funds enjoyed net inflows, this reversal suggests growing caution, likely due to interest rate expectations.

* Equity Funds:

Retail investors stayed bullish. Net inflows hit Rs.19,013 crore, growing 12.7% from April and up ~20% from May 2024. Clearly, equity remains the go-to for long-term wealth creation.

* Hybrid Funds:

These “middle-path” options drew in Rs.20,765 crore, up 13% MoM and 18% YoY. Their rising popularity shows investors are looking for balance—between growth and safety.

3. Sectoral & Thematic Funds: Finding Favourites

* Small-Cap Funds continued to shine with Rs.3,214 crore in inflows, an 8% MoM rise and 25% YoY growth. Retail and HNI investors seem confident in India’s small-cap story.

* Thematic Funds attracted Rs.2,052 crore, reflecting a ~18% jump over last year. The hunger for specialized, niche investment strategies is growing fast.

4. Investor Participation: The Base is Expanding

India now has 23.83 crore mutual fund folios, up 2.1% from April and a big 16.5% surge YoY. This growth in participation highlights increasing financial literacy and trust in mutual fund products.

5. New Fund Offers: Fresh Ideas on the Table

May 2025 saw Rs.4,170 crore mobilized via 19 new schemes, compared to Rs.3,650 crore in April—a 14% MoM rise.

YoY, the jump is even more striking at 29%, with Multi-Cap and Sectoral/Thematic funds leading the charge.

6. Debt vs Equity: A Tale of Two Sides

* Liquid Funds witnessed outflows of Rs.40,205 crore, up from Rs.36,500 crore in April. This could reflect corporates and institutions pulling money from short-term parking amid changing liquidity needs.

* On the flip side, equity funds continue to see strong inflows, reaffirming investor confidence in the market’s resilience.

What It All Means – The Big Picture

* Investor Preferences Are Evolving: There’s a clear lean toward equity and hybrid funds, driven by long-term growth outlooks and a cautious stance on debt.?

* Sectoral & Small-Caps Are Heating Up: These categories are seeing faster growth, suggesting maturing market behavior with investors targeting themes and hidden gems.

? * Retail Participation Is Surging: More folios, more trust. The mutual fund revolution is becoming mainstream.

? * Debt Outflows = Rate Sensitivity: Fixed-income strategies are under pressure, reflecting a wait-and-watch approach toward interest rates

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