Record SIPs and AUM Surge : Mutual Funds Bullish on Private Banks, Metals, Utilities By Rishabh Goel, MD, Tailwind Financial Services
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In April, inflows into India's equity mutual funds slowed down, yet net assets under management (AUM) surged past 57 trillion rupees for the first time. The industry took nearly five decades to reach the first 10 trillion rupees of AUM, but just a year to jump from 40 trillion rupees to 50 trillion rupees. The sector's growth remained strong, adding the last 7 trillion rupees of assets in only four months. Net equity mutual fund inflows declined by 16.4% sequentially to 189.17 billion rupees, the lowest since December 2023, according to data from the Association of Mutual Funds in India (AMFI).
SIPs Reach Record High
Systematic Investment Plans (SIPs) hit a record high of 203.71 billion rupees in April, reflecting sustained investor confidence despite market fluctuations. This record high indicates a strong commitment from retail investors towards long-term wealth creation through disciplined investing.
Equity Fund Inflows Slow
Despite the overall positive sentiment, net equity mutual fund inflows declined by 16.4% sequentially to 189.17 billion rupees in April. This decline can be attributed to market volatility and cautious investor behavior in light of global economic uncertainties.
Resurgence in Small-Cap and Mid-Cap Interest
Investor interest in small-cap funds returned in April, with inflows rising to 22.09 billion rupees. Mid-cap funds also saw a significant increase in inflows, rising by 76.1% from the previous month. This resurgence in interest indicates a growing appetite for riskier assets among investors.
Sectoral and Thematic Interest
Mutual funds increased their investments in sectors like private banks, metals, utilities, telecom, consumer durables, and real estate in April. This shift in investment focus indicates a bullish outlook on these sectors' growth potential in the coming months.
In April 2024, domestic mutual funds increased their investments in various sectors, with private banks being the largest holding at 17.2%, indicating strong belief in their growth potential. Other sectors that saw increased weights in mutual fund portfolios were metals, utilities, telecom, consumer durables, and real estate.
Among Nifty 50 stocks, the highest month-on-month net buying was observed in Kotak Mahindra Bank, HDFC Life Insurance, HUL, Adani Ports, and Hindalco. Banking stocks dominated the top gainers, reflecting a surge in investor confidence in the banking industry.
Conversely, mutual funds reduced their investments in sectors such as technology, healthcare, oil & gas, consumer, retail, cement, insurance, and textiles compared to the previous month.
Robust Growth in Passive Funds
Passive funds added 65.50 lakh folios year-on-year, surpassing active funds in folio growth. Index funds led the pack with a 98.57% growth rate, indicating a growing preference for passive investment strategies among investors.
Marginal Contraction in Debt Fund Folios
Despite occasional marginal increases, debt fund folios saw a slight decline in April, continuing a trend of pressure seen in recent months. This decline can be attributed to market volatility and rising interest rates, which have impacted investor sentiment towards debt funds.
Positive Growth in Hybrid Funds
All 8 categories of hybrid funds saw folio expansion in April, with multi-asset allocation funds leading at 96.90% growth year-on-year. This positive growth indicates a growing interest in hybrid funds among investors looking for diversified investment options with varying risk profiles.
Robust MF Folios Growth
In April 2024, the total number of mutual fund folios reached 18.15 crore, compared to 17.79 crore in March, 17.42 crore in February, and 16.96 crore in January. Year-on-year, folios grew by a robust 23.94%, surpassing the rates of 22.04% in March, 20.76% in February, and 18.70% in January 2024. This consistent and progressive growth trend indicates a positive trajectory. Closed-ended folios also saw a year-on-year growth of 14.23%, driven by increased demand for fixed term plans (FTPs) or FMPs. However, closed-ended folios remain a small fraction, less than 0.31%, of the total mutual fund folios.
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