ICRA: India’s mutual fund industry set to grow multiple times by 2025, driven by optimism among retail investors

Net inflows into the Indian mutual fund industry surged by 135% last year, and net AUM (assets under management) grew by nearly 39%. It is likely to grow several times in the coming year.

Total mutual fund inflows during November 2024 reached $60,295.30 Crore, a growth of 135.38% as compared to inflows $In November 2023, the net assets under management reached Rs 25,615.65 crore. $680.8 trillion in November 2024. $49.05 billion, an annual increase of 39%.

The sharp expansion in AUM was helped by steady inflows from equity schemes, which surged 131.35% to $35,943.49 Crore in November 2024 $15,536.42 crore last year. Since the beginning of 2024, inflows into equity mutual funds have increased by 65.03% compared to 2024 levels. $21,780.56 billion in January 2024.

At the beginning of 2025, the Indian market is facing significant volatility.

However, amid headwinds, ICRA said the Indian mutual fund industry has shown resilience, driven by optimism about India’s economic growth prospects, strong participation from retail investors, expanding investor base and growing investor appetite. interest and awareness.

Large-cap fund inflows increased significantly by 731%

While all equity funds posted strong growth, large-cap funds stole the show, with inflows into the category surging by nearly 731%. $2547.92 Crore in November 2024 $3.067 billion in the same period last year.

Sector/theme funds followed closely behind, with capital inflows surged 289.77% to $Rs 7,657.75 crore; Flexi cap increased by 204.88% $Rs 5,084.11 crore; large and mid-cap stocks up 153.31% $Rs 4,679.74 crore; and value/contrast funds 66.79% $2088.01 crore, according to ICRA data.

However, in terms of asset management scale, sector/theme funds experienced the largest increase, reaching 94.78%. $Rs 46.2 trillion; large and mid-cap stocks up 54.25% $2.68 billion rupees; elastic cap increased by 42.13% $435 Crore and Small Cap Growth 48.24% $326 crores.

Maintain higher capital inflows

“Domestic equity markets have been volatile in the past two months, mainly due to lower-than-expected corporate profit data for the quarter ended September 2024. Ashwini Kumar, senior vice president and head of market data at ICRA Analytics, said that rising domestic inflationary pressures and the U.S. President The election results dampened hopes for a rate cut by the Federal Reserve.

“Additionally, growing uncertainty over global policies, geopolitical issues and rising valuations has led to market volatility. Large and mid-cap funds are likely to become a major attraction for investors as domestic market volatility intensifies in the coming days. Geographical political risks and global uncertainty,” Kumar added.

Small and mid-cap funds, which have seen steady growth in AUM, are also likely to attract investor interest in the medium to long term, as these entities create value supported by a robust regulatory framework, thereby improving the operating conditions of businesses. Practice and the government’s strong will to promote the inherent growth of the country’s economy.

There has also been an increase in activity in thematic funds, particularly those related to infrastructure, healthcare and IT.

“Investors, especially in the retail space, are looking for new growth opportunities and exploring avenues to generate alpha or higher returns. This explains the increase in sector/thematic fund activity over the past few years. However, such funds are suitable Investors who understand the dynamics of a specific industry or theme and can effectively evaluate its growth prospects and risk-taking capabilities must keep abreast of the latest market trends and economic developments and make informed investment decisions.

Looking ahead, “Market participants will continue to remain optimistic about the growth prospects of the Indian economy, which can be attributed to strong corporate balance sheets and government support. The Indian economy is expected to stabilize, led by a pickup in corporate capital spending and bank credit growth. However, rising domestic inflationary pressures, an uneven and below-average monsoon, global crude oil price volatility, tensions in the Middle East, geopolitical tensions between Russia and Ukraine, protectionist measures by the new U.S. administration, and valuations A rise could impact the stock market.

Disclaimer: The opinions and suggestions given in this article represent only the personal opinions and suggestions of the analysts. These do not represent the views of Mint. Investors are advised to consult a certified expert before making any investment decisions.