- The inflow into equity mutual fund schemes in June 2023 reached ₹5,600 crore, rising from ₹3,066 crore in May.
- Over the last four months, the BSE small-cap index has surged by 30%, while the S&P BSE
Sensex saw a comparatively smaller increase of less than 17%. - In June 2023, small-cap funds recorded their highest-ever inflows at ₹5,500 crore.
Between December 2022 and March 2023, the Nifty 50 index experienced a decline of approximately 10% from its recent peak. However, following this, the market staged a strong recovery and regained all of its losses, reaching new all-time highs.
Notably, during this recovery phase, mid-cap, and small-cap stocks outperformed – over the last four months, the BSE small-cap index has surged by 30%, while the S&P BSE Sensex saw a comparatively smaller increase of less than 17%. This indicates a robust performance by the smaller-cap stocks during the market rebound.
The recent months have seen higher inflows into mid-cap and small-cap funds. In June 2023, small-cap funds recorded their highest-ever inflows at ₹5,500 crore, compared to ₹3,300 crore in May 2023. During the first half of 2023, small-cap funds received ₹18,000 crore in inflows, as compared to the total inflows of ₹20,000 crore in entire 2022.
To put this in context, the Assets Under Management (AUM) of the mutual fund industry maintained its upward trajectory, reaching a record-breaking ₹44.4 lakh crore by the end of May 2023, compared to ₹43.2 lakh crore in May 2022. This growth was predominantly fueled by mark-to-market gains in the equity segment.
In June 2023, inflows into equity schemes, excluding New Fund Offers (NFOs), showed signs of recovery after experiencing lower inflows for the past two months. The inflows in June 2023 reached ₹5,600 crore. This is almost a third of the inflows seen in March at ₹16,693 crore, but higher than that seen in April and May at ₹4,868 crore and ₹3,066 crore, respectively.
In contrast, debt funds experienced outflows, mainly due to liquid funds. However, excluding liquid funds, other debt fund categories witnessed inflows of over ₹14,000 crore. These other debt fund categories have been experiencing moderate inflows over the past four months as interest rates peaked.
Despite the macroeconomic uncertainty stemming from expectations of continuous rate hikes by the US Federal Reserve and concerns over higher interest rates in the long term, the global equity markets also experienced a rally in the recent months, according to the Mutual Fund Review by ICICI Direct Research. And this has rubbed off on the Indian markets.
In terms of sectors, pharma funds followed a trajectory similar to IT funds, which had experienced significant underperformance over the past year but made a comeback in the last month, thanks to increased investor interest at lower price levels, according to the ICICI Direct report.
The report also points out that infrastructure funds have consistently outperformed over the past year, benefiting from the strong performance of cyclical sectors in comparison to stable sectors like IT and Pharma.
The banking sector has been another standout performer over the last year, similar to the infrastructure sector.
In the last two months, consumption funds have also performed well due to sector rotation, with increased interest in segments like FMCG, auto, and retail, all part of the larger consumption theme.
Although the banking sector recently witnessed some consolidation, it has been a stable and strong performer over the past year.
One of the biggest gainers, however, have been the small-cap funds. Considering the current trend, if the overall market remains stable, small-cap funds are expected to continue their outperformance in the future.