Indian mutual fund industry posts stellar performance in FY24; AUM jumps 35% to Rs 39.42 lakh cr

The net outflows surged to Rs 1.59 lakh crore in March 2024, as against a net outflow of Rs 19,264 crore in March 2023.

After two successive months of higher inflows, debt-oriented schemes witnessed net outflows of Rs 1.98 lakh crore in March 2024, as against net outflows of Rs 56,884 crore in March 2023.

Redemptions from short-term funds such as liquid funds, overnight funds, ultra short-duration funds, and low-duration funds among others are usually higher in March on account of advance tax payments.

As many as 13 out of 16 fund categories witnessed outflows with liquid funds recording a steep surge in outflows at Rs 1.58 lakh crore in the month under consideration, as against an outflow of Rs 56,924 crore in the same period in 2023.

However, the long-duration fund and the gilt fund with a 10-year constant duration witnessed inflows as investors are investing in these funds in anticipation of a reduction in interest rates moving forward.

The Reserve Bank of India has, in its latest Monetary Policy Committee meeting in April, maintained the status quo on its benchmark rate at 6.5 percent.

ICRA Analytics Head- Market Data, Ashwini Kumar, said, “The central bank is likely to maintain status quo on rates for the next one or two quarters, which will lead to some softness in yields in the near term.

“However, the ensuing election months will keep the investors a little cautious even as they will closely watch the global interest rates.”

The inflows into the equity-oriented schemes grew by nearly 10 percent at Rs 22,633 crore, up from Rs 20,534 crore last year backed by increasing inflows across various equity-oriented schemes including sectoral, flexi cap and large and mid-cap funds among others, he noted.

After a consistent surge in inflows since the beginning of this fiscal, the small-cap funds registered net outflows to the tune of Rs 94 crore in March 2024.

This could be on the back of some correction in the segment post the recent SEBI mandate requiring routine stress tests to be conducted on small and mid-cap funds to highlight the potential liquidity risk associated with these funds when the markets come under pressure.

“However, we feel that the small-cap and mid-cap funds, which have witnessed a steady surge in AUM over the last one year, are likely to hold investor interest in the medium to long term especially in the strong and quality stocks. Value creation in the entities supported by robust regulatory framework, better corporate governance practices, and the government’s firm intent to push for an intrinsic growth in the country’s economy will keep the investor interest strong," said Ashwini Kumar.