The mutual fund industry in India has witnessed a phenomenal rise over the past decade, with assets under management (AUM) growing more than seven-fold to Rs 61.2 lakh crore as of June 2024 from Rs 8.3 lakh crore in December 2013. A recent study by Motilal Oswal Asset Management Company (MOAMC) titled “Where the Money Flows” reveals that AUM of passive funds has grown to Rs 10.2 lakh crore with 17% of the total market share, while AUM of active funds stands at Rs 50.9 lakh crore, as of June 2024.
Source/Disclaimer: AceMF, AMFI, MOAMC. Data as of June 28, 2024.
According to the study, equities account for the majority of the share with 59.75% of total assets under management, followed by 26.95% in debt, 8.85% in hybrids and 4.44% in others.
Below are the highlights of the report:
- AUM has grown from Rs 8.3 lakh crore in December 2013 to Rs 61.2 lakh crore in June 2024.
- Passive funds have seen a significant rise, accounting for Rs 10.2 lakh crore in AUM, which is 17% of the total market share.
- Equities remain the largest asset class, accounting for 59.75% of total assets under management.
- Debt funds account for 26.95%, while hybrid funds hold 8.85% of total AUM.
Debt funds take center stage
Quarterly Summary:
- Mutual funds received a total of Rs 325,000 crore in inflows, with almost equal contributions from equity and debt funds (Rs 166,000 crore in debt, Rs 143,000 crore in equity and Rs 8 lakh crore in multi-asset funds), led by a near-equal split between debt and equity funds.
- 35 new schemes were launched, which together raised over Rs 27,000 crore.
- Active funds continue to dominate the market with an 83% share, while passive funds have 17%.
- Broad-based equity and arbitrage funds were particularly popular, attracting over 73% of net equity inflows.
- Liquid and money market funds led debt fund inflows.
- Resurgence of Hybrid Funds: Multi-asset, equity savings and balanced advantage hybrid funds saw significant inflows.
- International fund outflows: Investors were cautious about international funds, leading to net outflows of Rs 1.5 lakh crore.
- In the equity segment, Broad Based and Arbitrage funds stole the show, capturing over 73% of net inflows in the equity category.
- Debt funds experienced significant net inflows, driven primarily by liquidity and money market funds (>85% of net inflows in this category), followed by overnight funds. Passively managed liquidity and long duration funds experienced significant net inflows, given their relatively small assets under management.
- The last quarter saw the resurgence of hybrid funds with Multi Asset funds leading the way with net inflows of Rs 85,000 crore, followed by Equity Savings (Rs 3,200 crore) and Balanced Advantage (Rs 2,600 crore) funds.
Investors flock to broad-based and thematic arbitrage funds
- Broad-based funds, both active and passive equity, attracted significant net inflows as equity markets continued to recover in the final quarter.
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Active equity funds: Thematic funds attracted Rs 20,000 crore, while arbitrage funds garnered Rs 30,000 crore. -
Passive equity funds: Factor funds, particularly momentum-based funds, received inflows of Rs 5,000 crore.
- Investors continued to bet on broad-based funds across categories, with net inflows of Rs 45,000 crore in assets and Rs 32,000 crore in liabilities in Q1FY25.
- Flexi Cap, Mid Cap, Small Cap, Multi Cap and Large & Mid Cap funds gained momentum and attracted net inflows of over Rs 7,000 crore each.
- Investors continued to prefer passives for their large-cap allocations, with the category receiving more than 95% of all net inflows into the passive segment.
The infrastructure category leads the thematic segment
Investors also bet on active thematic funds, which stood out with net inflows of Rs 20,000 crore. Infrastructure, manufacturing, business cycle and PSU funds gained momentum, attracting net inflows of over Rs 2,000 crore each. Passively managed thematic funds in the PSU category recorded the highest net inflows among the passive segment in the thematic sector.
Active constant maturity and passive target maturity drive net inflows
According to the study, debt funds faced substantial net inflows in the June quarter, across both active and passive funds. Meanwhile, constant maturity funds dominated the inflows, accounting for the majority of flows in the active debt category, followed by corporate bond and government bond funds, with some inflows.
Liquid and money market funds drive estimated net flows
Liquid and money market funds drove net inflows to the category (>85%), followed by Overnight funds, in the June quarter.
Low duration and ultra short term funds saw net inflows of over Rs 10,000 crore.
Typically, investors use debt funds with maturities of up to one year to park excess cash in the short term, which creates high volatility in inflows and outflows.
Multi-asset funds continue to have strong traction
Multi-asset funds led the hybrid category, garnering 60% of the net inflows, followed by equity savings funds at 23% and balanced advantage funds at 17%. Aggressive and conservative hybrid funds recorded net outflows of Rs 0.3 k crore each. The multi-asset category recorded net inflows of close to Rs 8,500 crore.
No country for international funds
- During the quarter, there were outflows from the International category across all categories, mainly attributed to the RBI threshold, resulting in few restrictions on fresh investments in such schemes.
- Actively managed international funds recorded net outflows of Rs 1,000 crore, with a relative majority in the broad-based category.
- Despite the overall positive sentiment towards Indian mutual funds, international funds witnessed a modest net inflow of Rs. 500 crore during the quarter.
First published: August 21, 2024 | 14:39 IS
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