Mutual fund assets soar to record high; thematic funds lead equity surge

India's mutual fund assets surged to a record Rs 66.7 lakh crore ($794.45 billion) by the end of August, marking an increase of approximately 16 lakh crore rupees in 2024 alone.

In August, equity mutual fund inflows rose 3 per cent sequentially to Rs 38,239 crore, nearing the record inflow of Rs 40,608 crore achieved in June, according to the Association for Mutual Funds in India.

Retail investors surge

The benchmark equity indices have seen a 15.5 per cent gain in 2024, following a 20 per cent increase last year. This has attracted numerous retail investors to participate both through mutual funds and directly in the stock market.

Year-to-date, equity mutual fund inflows have surged nearly three-fold compared to last year, reaching 2.41 trillion rupees, marking the fastest growth on record. Thematic and sectoral funds have played a significant role, contributing 45 per cent of these inflows.

Since March 2021, equity mutual funds have attracted 6.74 trillion rupees, contributing to a 74 per cent rally in the stock market and helping to mitigate the impact of foreign outflows.

Large cap funds soar

In August, the benchmark indices gained approximately 1.1 per cent, bolstered by increased equity inflows. Interest in large-cap funds grew substantially, with inflows quadrupling sequentially to 26.87 billion rupees, the highest since March 2022. Small-cap and mid-cap funds also saw significant inflows, despite concerns over high valuations in these segments.

The Nifty mid-cap 100 and small-cap 100 indices rose 0.9 per cent and 0.5 per cent, respectively, in August, underperforming the broader benchmarks.

Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment Research India, said, “The strong net inflows into new fund offers (NFOs) highlight their ongoing attractiveness among investors.” However, he cautioned, “Investors should be wary when choosing sectoral or thematic funds as they carry high risk and high return potential, which may not suit every investor’s portfolio.”

Systematic Investment Plan (SIP) contributions reached a new high of Rs 23,547 crore in August, marking a record for the 14th consecutive month.

(With Reuters Inputs)