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Equity Mutual Funds See Growth Despite Decline in Monthly Inflows
In November 2023, the mutual fund industry saw notable growth, despite a month-on-month decrease in inflows into equity mutual funds.. Despite this dip, the overall industry’s net assets under management (AUM) grew by 1.22 percent, reaching Rs 68.08 lakh crore compared to Rs 67.26 lakh crore in October. This expansion underscores the resilience of the sector amid fluctuating market conditions.
Open-ended mutual funds contributed significantly to the positive trajectory, with net inflows totaling Rs 60,363.70 crore for the month. Equity funds maintained their momentum, marking the 45th consecutive month of positive inflows since March 2021. Moreover, November saw the launch of 18 new fund offerings (NFOs), four of which were in the equity category, compared to six in October. These dynamics highlight investors’ continued interest in mutual funds as a wealth creation vehicle.
Key Insights from AMFI’s November Data
Steady Inflows in Equity Funds
Equity mutual funds continued to grow, although inflows decreased on a monthly basis. For November, equity schemes attracted Rs 35,943 crore, a 14 percent drop compared to October. Within the equity segment, sectoral and thematic funds drew Rs 7,658 crore, while flexi-cap funds garnered Rs 5,084 crore. Despite the decline, experts remain optimistic.
“Flows into equity-oriented schemes have consistently remained above Rs 35,000 crore, even amid volatile markets,” noted Venkat Chalasani, Chief Executive at AMFI.
Thematic Funds Witness Caution
Although thematic funds have continued to attract investors, the rate of growth appears to have slowed. The decreasing number of NFO launches over recent months reflects a cautious approach among investors.
“Investors seem to be in a wait-and-watch mode, possibly looking for more market clarity or conserving funds for other opportunities,” said Srivastava, a financial expert. He added that many investors prefer systematic investment plans (SIPs) or diversified equity funds over thematic funds, which may explain the cautious sentiment.
Small-Cap Funds Back in Favor
In the equity segment, small-cap funds stood out with a 9 percent increase in inflows, reaching Rs 4,111.89 crore. Mid-cap funds also saw growth, with inflows rising by 4.3 percent to Rs 4,883.40 crore. However, large-cap funds experienced a decline, with inflows falling by 26 percent month-on-month to Rs 2,547.92 crore.
Viraj Gandhi, MD and CEO of Samco MF, highlighted an interesting trend. While equity schemes saw net inflows of Rs 35,943 crore in November, the total net AUM for the category decreased by Rs 38,566 crore due to corrections in the main market indices.
“Historically, small-cap indices have been more vulnerable during market corrections. However, this time, small-cap schemes showed remarkable resilience, falling the least and nearing all-time highs during the bounce-back,” Gandhi explained.
Manish Mehta, National Head of Sales and Marketing at Kotak MF, attributed the sustained demand for small-cap funds to industry recommendations advocating exposure to small and mid-cap schemes through SIPs or systematic transfer plans (STPs).
“This approach has strengthened the SIP books of small-cap schemes, resulting in higher net inflows during the month,” he said.
SIPs Drive Market Resilience
Systematic Investment Plans (SIPs) continued to play a crucial role in sustaining the mutual fund industry’s growth. In November, SIP inflows reached Rs 25,319.66 crore, only slightly below October’s Rs 25,322 crore. The total SIP AUM at the end of November stood at Rs 11.79 lakh crore, accounting for nearly 20 percent of the total equity and growth mutual fund assets.
The number of active SIP accounts also increased, rising to 10.22 crore from 10.12 crore in October. While 10 lakh new accounts were added, 39.14 lakh accounts either matured or were closed.
Shrikant Chauhan, Head of Research at Kotak Securities, emphasized the importance of SIPs in minimizing market downside.
“SIPs have provided stability to the markets, especially during periods of heavy foreign institutional outflows. Domestic inflows from SIPs have helped balance market dynamics, a trend that was less evident in the past,” Chauhan noted during the Kotak Securities’ Market Outlook 2025 conference.
Mehta echoed this sentiment, stating that SIP flows, combined with lump-sum purchases on volatile market days, boosted net inflows to over Rs 30,000 crore.
“This demonstrates investors’ confidence in mutual funds as an effective vehicle for long-term wealth creation,” he said.
Passive Funds and Gold ETFs Retain Popularity
The passive fund category witnessed marginal growth of 0.8 percent in November, with inflows amounting to Rs 7,061 crore. This indicates sustained interest in index funds and exchange-traded funds (ETFs) among investors looking for low-cost, diversified investment options.
Gold ETFs, meanwhile, continued to shine, attracting net inflows of Rs 1,257 crore during the month. Although the funds mobilized were lower than in October, redemption numbers increased. Srivastava attributed this to profit-booking by investors, given gold’s elevated trading levels and the impending marriage season, which traditionally drives demand for physical gold.
“Investors likely chose to capitalize on high gold prices while preparing for increased physical gold purchases during the marriage season,” he explained.
