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Both mid-cap and small-cap mutual fund schemes have continued to attract significant investor interest, having garnered about Rs 30,350 crore in inflows during the April-September period of the current financial year. Last year, as data from <keyword id="6359050" type="General" weightage="20" keywordseo="AMFI" source="Orion">AMFI</keyword> showed, the total inflows in both these segments during the same period were only marginally higher at Rs 32,924 crore. Data from Value Research suggests that mid-cap funds have generated 46.25% returns over the past year, while small-cap funds have yielded returns worth 44.17% during the same time. This is far better than their 3-year returns, which stand at 20.67% for midcaps and 21.64% for smallcaps. The returns further moderate over 5 years to 32.44% for small caps and 27.94% for midcaps. Inflows in mid- and small-cap funds have only grown from strength to strength during the current year, despite market watchdog <keyword id="35210" type="General" weightage="20" keywordseo="SEBI" source="Orion">SEBI</keyword> repeatedly highlighting the high risks both these categories entail. Between January and March 2024, small-cap funds saw inflows worth Rs 6,085.27 crore, while mid-cap funds were a little behind, garnering inflows worth Rs 4,887.05 crore. Between April and June this year, small-caps saw inflows worth Rs 7,196.8 crore. At the same time, midcaps saw inflows worth Rs 6,926.60 crore. In line with this increase in inflows, the number of investors (folios) in the two schemes shot up by 1.32 crore year-on-year to nearly 4 crore in the six-month period ended September 30, 2024. Since 2020, the small-cap universe (i.e., companies with a market cap of less than Rs 2000 crores) has grown nearly fourfold, offering investors a wide range of investment opportunities. Data from Trust Mutual Fund also shows that small-cap funds have also emerged as great generators of long-term wealth. Between August 2014 and August 2024, the <keyword id="6354813" type="General" weightage="20" keywordseo="Nifty" source="Orion">Nifty</keyword> 100 total return index (TRI) has yielded a CAGR of 14.7%. In contrast, the Nifty smallcap 250 TRI has registered a CAGR of 18.2% "Small caps will continue to grow at a faster rate for years to come. I expect the inflows to continue as Indians want to invest in the high-growth sectors. Small-cap funds should be seen as an integral part of one's portfolio allocation and not a tactical play," Trust Mutual Fund CEO Sandeep Bagla told PTI. Individually, mid-cap funds saw an inflow of Rs 14,756 crore, and small-cap funds attracted Rs 15,586 crore in the first half of FY25. This aggregates the total inflow to Rs 30,342 crore, the data showed. In addition, the stress test in March 2024 has also played a role, reinforcing confidence by ensuring that fund managers are prepared to handle market volatility, Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd, said. "With the mid-cap and small-cap segments projected to grow at 20 percent and 25 percent, respectively, in FY25, we expect inflows to remain strong, especially as SIP inflows continue to hit new peaks," he told media.

Investors pour in Rs 30,350 crore in mid and small cap funds in the first half of 2024

Investors continued to push significant money into sectoral, or thematic funds, with the category seeing inflows worth Rs 18,117.18 crores during August 2024. The inflows in this category remained largely flat last month, changing negligibly from Rs 18,386.35 crores in July 2024. During August, 5 new thematic mutual fund NFOs were launched, which raised a total of Rs 10,093.57 crore. <h2>42nd consecutive month of positive inflows</h2>This takes the total tally of existing sectoral fund schemes to 179. The next category with most schemes offered (42) is <keyword id="103549" type="General" weightage="20" keywordseo="ELSS" source="Orion">ELSS</keyword> (equity-linked savings scheme). Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India cautioned that investors should be cautious while selecting funds specially from the sector/thematic category. Such funds offer a very high-risk high return investment proposition and may not fit in the portfolio of every investor. "Either investors should themselves understand the dynamics of the underlying sector or theme to take a prudent investment decision, or they should have a strong advice available to them, who can help them take the right decision", he advised. Inflows in small-cap funds tapered significantly, and are now largely in line with funds garnered by large-cap and mid-cap funds. In August, large-cap funds saw inflows worth Rs 2,636.86 crore, while large and mid cap funds amassed Rs 3,293.74 crore. Small-cap funds raked in Rs 3,209.33 crore during the month. "With large cap segment faring relatively better from valuation point of view, investors have shifted their attention towards this category again. Besides, large cap funds add stability to the portfolio during the times of market volatility, and this could be another reason for investors to invest in these funds, given heightened volatility observed in the markets in the recent times. Additionally, with the valuation high in the mid and small cap segments, some shift towards large caps is not surprising", continued Srivastava. Also, investors showed far more proclivity for <keyword id="6357979" type="General" weightage="20" keywordseo="Mutual-Funds" source="Orion">mutual funds</keyword> spread over various market caps, as opposed to a single one. This is evident in the amount garnered by flexi-cap funds, which amassed Rs 3,513.16 crore. All in all, the equity segment saw total inflows of Rs 34,302.82 crores in August, making it the 42nd consecutive month of net inflows in this segment. Even the number of folios in equity jumped 3.16%, up from Rs 13.8 crore in July to Rs 14.3 crore in August. In hybrid funds, balanced advantage funds saw inflows worth Rs 3,215.06 crore, while multi-asset allocation funds received Rs 2,826.89 crore. <h2>Debt inflows take a dip</h2>As for debt categories, they saw inflows worth Rs 45,169.36 crore during the month, higher than their equity counterparts. However, this was significantly lower than the inflows it registered in July, which stood at Rs 1,19,587.60 crore. The biggest contributors to this quantum were <keyword id="428654" type="General" weightage="20" keywordseo="liquid-funds" source="Orion">liquid funds</keyword> and overnight funds, which received Rs 13,594.87 crore, and Rs 15,105.93 crore respectively. And despite various PSU stocks having a good run on the bourses, banking and PSU funds saw outflows worth Rs 1,549.99 crores, the highest in debt segment. Nehal Meshram, Senior Analyst, Research, Morningstar Investment Research India highlighted that overnight funds, liquid funds and money market funds accounted out 86% of the overall debt inflow last month. "This trend reflects a preference for low-risk and highly liquid investment options. Investors also showed a preference for categories with shorter maturity profiles, such as short term, corporate bond and ultra short duration funds, for temporary parking of funds. Medium duration funds, which had consistently seen outflows, reported marginal inflows in August for the first time in 15 months", she explained. During the month, about 63,93,602 new SIPs were registered.

Sectoral funds rake in Rs 18,117.18 crore during the month, debt schemes see more inflows than equities, notes AMFI data for August

These 4 unflashy mid-cap stocks are on track to be tomorrow's mega-caps, according to one $3.2 billion fund manager 

New Delhi, Asset management companies launched 212 <keyword id="20372350" type="General" weightage="20" keywordseo="new-fund-offerings" source="keywords">new fund offerings</keyword> mobilising Rs 63,854 crore in 2023, marginally higher from previous year, on the back of significant uptrends in broader markets. In comparison, Asset Management Companies (AMCs) garnered Rs 62,187 crore through 228 New Fund Offerings (NFOs) in 2022. Further, they collected Rs 99,704 crore in 2021 and Rs 53,703 crore in 2020, according to data compiled by <keyword id="20372349" type="General" weightage="20" keywordseo="morningstar-india" source="keywords">Morningstar India</keyword>. "The trend towards the financialisation of assets in India is unmistakable. Aligned with changing consumption behaviours and a need for a higher standard of living, investors recognise the importance of long-term investing. The COVID-19 pandemic underscored the necessity for financial planning and the creation of liquid assets to address emergencies and pave the way for wealth-building," FYERS Research said in its report. It further said that "despite indices exhibiting strength, propelled by robust economic activity, steady <keyword id="19951327" type="General" weightage="20" keywordseo="gst" source="keywords">GST</keyword> collections, and confidence in government reforms and policies, anticipating a similar outperformance in 2024 may not be prudent. Valuations across various market capitalisations look elevated, advocating a cautious approach to direct equities in the short term". As per the FYERS report, the January-March period of 2023 saw the highest number of NFOs at 57. However, the peak fund mobilisation occurred in the July-September period, totalling Rs 22,049 crore. Additionally, 29 thematic or sectoral funds raised an aggregate of Rs 17,946 crore in 2023. With an increased risk appetite for equities and awareness of products and offerings, retail investors opted for higher-risk products like thematic and sectoral funds compared to other products. Usually, NFOs come during a surging market when investor sentiments are high and optimistic. The NFOs were floated to capitalise on the mood of investors and attract their investment as they were willing to invest at that time. Industry experts said that the stock market performance along with the positive investor sentiments led to higher fund mobilisation through NFOs in 2023. In the year 2023, Nifty 50 index delivered a return of 20 per cent, majorly supported by earnings growth. <keyword id="19994732" type="General" weightage="20" keywordseo="nifty-midcap" source="keywords">Nifty Midcap</keyword> and <keyword id="20118967" type="General" weightage="20" keywordseo="nifty-smallcap" source="keywords">Nifty Smallcap</keyword> indices recorded impressive returns of 47 per cent and 56 per cent, respectively. Domestic Institutional Investors (DIIs) infused a substantial Rs 1.7 lakh crore into the market and the infusion played a pivotal role in propelling Indian equities beyond the USD 4 trillion market capitalization milestone. Overall, the mutual fund industry saw a net inflow of Rs 2.74 lakh crore in 2023 as compared to an inflow of over Rs 71,000 crore in the preceding year. The huge inflow could be on the back of sustained investors' interest in equity funds, arbitrage funds, and index funds &amp; ETFs. Debt schemes experienced a net outflow of Rs 46,100 crore last year, while equity schemes saw substantial inflows of Rs 1.62 lakh crore, closely followed by hybrid category schemes at Rs 93,208 crore.

Mutual funds collects ₹63,854 cr via new fund offers in 2023

<ul><li>According to AMFI data, <keyword id="19978171" type="General" weightage="20" keywordseo="as-of-early-december" source="Orion">as of early-December</keyword>, the average one-year returns for 23 small-cap funds stood at 32.68%. </li><li>58% of the large cap funds failed to beat their underlying indices in the first half of 2023. </li><li>Contributions to <keyword id="159805" type="General" weightage="20" keywordseo="sips" source="Orion">SIPs</keyword> surpassed a record ₹17,000 crores in November. </li></ul>After a brutal 2022, <keyword id="6357979" type="General" weightage="20" keywordseo="mutual-funds" source="Orion">mutual funds</keyword> have had a solid year in 2023 with retail investors having come of age. Moreover, according to Association of Mutual Funds in India (AMFI) data, mutual funds industry assets under management (AUM) have crossed the ₹50 lakh-crore mark! Investments into equity mutual funds saw an inflow of ₹124,053 crore in the first nine months of 2023 indicating a strong interest and belief in the potential of the equity market among domestic investors. This was not of course without its share of blips. In April 2023, inflows into equity mutual funds stood at ₹6,480 crore, down 68% from March when it was ₹20,534 crore. Last time inflows were lower was in November 2022, when it stood at ₹2,258 crore. Inflows into equity mutual funds again halved in May, probably because high market valuations made investors book profits and stay away from fresh investments. However, ever since then the flows into equity mutual funds have remained steady, reaching a high of ₹19,932 crore crore in October. Small and mid caps steal the show According to AMFI data, as of December 6, 2023, the average one-year returns for 23 small-cap funds stood at 32.68%. In contrast, 28 mid-cap funds delivered average one-year returns of 28.02%, in the same period. By November end, AUM of mid-cap funds had crossed the ₹ lakh crore mark, a 69% rise as compared to last year. In fact, small cap funds registered inflows of ₹3,699.24 crore in November ,slightly lower than the ₹4,495.13 crore recorded in October. Small cap funds had registered a record inflow of ₹5,472 crore in June, with inflow into small cap mutual funds being the highest among all equity fund categories for the third straight month. In August, small cap funds saw an inflow of ₹4,265 crore, with a slight blip in September when inflows fell to ₹2,678.47. This has been driven by the ongoing economic recovery, which has fueled corporate earnings growth, particularly among smaller companies with high-growth potential. Investors are optimistic about the future prospects of these companies, leading them to seek exposure through small-cap funds. AMFI chairman said it was the outcome of a recency bias. The surge in investor interest in mid-cap funds has also been fueled by several factors, including India's robust economic recovery, the inherent growth potential of mid-cap companies, their reasonable valuations compared to large-cap stocks, and supportive government policies. Large-cap funds funds underperform Large cap funds, however, had a rather dull 2023. Large-cap mutual funds experienced significant outflows in June, July, and May, totaling ₹2,050 crore, ₹1,880 crore, and ₹1,362 crore, respectively, making these some of the worst months for large cap funds. However, following six consecutive months of outflows, large-cap funds experienced an inflow of ₹724 crore in October, signaling a resurgence in investor confidence in established companies. November saw an inflow of ₹306 crore. In fact, 58% of the large cap funds failed to beat their underlying indices in the first half of 2023. This can be due to the confluence of factors, including rising interest rates favoring bonds, regulatory changes limiting fund manager flexibility, investor rotation seeking higher growth in smaller-cap stocks, and underperformance in key sectors like technology and consumer discretionary. SIP contributions witness a steady rise One of the biggest trends is the steady increase in monthly SIP contributions. SIP inflows reached ₹1.66 lakh crore in the first 11 months of 2022, higher than ₹1.5 lakh crore in entire 2022. Contributions surpassed a record ₹17,000 crores in November. In November 2022, the SIP contribution stood at ₹13,306 crore. The number of SIP accounts were at the highest ever in November at 744.13 lakh crore, compared to 730.02 lakh crore in October. The total SIP AUM (assets under management) has also shown impressive growth, exceeding ₹6.42 lakh crores in October. Despite facing market fluctuations, SIPs have demonstrated remarkable resilience. The consistent inflows and stable AUM indicate that investors are adopting a disciplined approach and remain confident in the long-term prospects of the market.

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Investors pour in Rs 30,350 crore in mid and small cap funds in the first half of 2024

BI India Bureau

Sectoral funds rake in Rs 18,117.18 crore during the month, debt schemes see more inflows than equities, notes AMFI data for August

Ira Alok Puranik

These 4 unflashy mid-cap stocks are on track to be tomorrow's mega-caps, according to one $3.2 billion fund manager

Christine Ji

Mutual funds collects ₹63,854 cr via new fund offers in 2023

PTI

Retail investors come of age in 2023 with small and midcap funds outperforming

Anagh Pal

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