Market Confidence Driven by Positive Economic Indicators

By Rishabh Goel, MD, Tailwind Financial Services

The mutual fund industry’s growth in June 2024 was marked by record equity inflows, driven by strong market confidence, SIP contributions, and NFOs. Despite challenges in the debt fund segment, overall, AUM continued to rise, reflecting the evolving investment strategies and confidence of investors. Key trends include a continued search for strong narratives in debt funds, high alpha interest in equity sectoral/thematic funds at market peaks, and a growing preference for hybrid funds for diversified asset allocation.

Equity Mutual Funds Surge in June 2024

June 2024 marked a significant milestone for equity mutual funds, with net inflows reaching ₹40,608 crore, up 17% from ₹34,697 crore in May 2024. This achievement set a new record for the second consecutive month, underscoring the continued positive trend in equity inflows since March 2021. By the end of June, the total assets under management (AUM) for equity mutual funds had climbed to approximately ₹27.68 lakh crore, up from ₹25.39 lakh crore at the end of May.

SIPs and NFOs Fuel Equity Inflows

Systematic Investment Plans (SIPs) played a crucial role in driving these inflows, contributing ₹21,262 crore in June, compared to ₹20,904 crore in May. This period saw the registration of 55,12,962 new SIPs, bringing the total number of SIP accounts to 8,98,66,962. Additionally, seventeen new fund offerings (NFOs) were launched in June, raising a total of ₹15,227 crore. Sectoral and thematic funds were particularly popular, collecting ₹12,974 crore from these NFOs.

Growth in Mutual Fund Industry AUM

The mutual fund industry’s net AUM for June 2024 reached ₹61,15,581.92 crore, up from ₹58,91,160.48 crore in May. This growth was driven by a combination of strong equity inflows and increasing investor confidence. Over the past year, the industry has seen significant expansion, with total AUM rising sharply from ₹10 lakh crore ten years ago and ₹51 lakh crore just six months ago.

Debt Funds Experience Outflows

In contrast to the positive equity inflows, debt mutual funds faced significant outflows totaling ₹1,07,357 crore in June, compared to inflows of ₹42,295 crore in May. This reversal was primarily due to higher redemptions by corporates to meet advance tax requirements. Liquid funds and overnight funds experienced the most substantial outflows, while money market funds saw inflows of ₹9,590 crore.

Sectoral and Thematic Funds Lead Equity Scheme Inflows

Sectoral funds led equity scheme inflows in June with ₹22,351 crore, followed by multi-cap funds at ₹4,708 crore and flexi-cap schemes at ₹3,058 crore. Large-cap fund inflows were ₹970 crore, mid-cap funds saw ₹2,527 crore, and small-cap funds had ₹2,263 crore in inflows. The strong performance of sectoral and thematic funds highlighted investor interest in targeted investment strategies.

Trillion Rupee Club Expansion

The Trillion Rupee Club, consisting of fund categories with over ₹1 trillion in AUM, added a new member in June. Out of 39 open-ended fund categories, 20 had over ₹1 trillion in AUM, with active equity funds and some debt fund categories leading the pack. Flexi-cap funds had the highest AUM among equity funds, followed closely by sectoral/thematic funds.

Hybrid and Passive Funds

Hybrid fund inflows dropped by 50% to ₹8,854.74 crore in June from ₹17,990.67 crore in May. Net flows into multi-asset allocation funds were ₹3,453.12 crore, and arbitrage funds received ₹3,836.58 crore. Meanwhile, passive funds maintained steady inflows, with net inflows of ₹14,602 crore driven by ₹9,134 crore into Index ETFs and ₹5,072 crore into index funds.