Mutual fund industry in India has experienced remarkable growth over the past decade, with assets under management (AUM) skyrocketing from 8.9 trillion to an impressive 49.05 trillion, a more than 5-fold increase in 10 years. Investors have shown phenomenal interest in the equity mutual funds category.
The equity market’s bullish performance in 2023 played a significant role in this growth. As the market rose, share prices increased, and indices soared, reflecting the overall positive sentiment and strong performance of the Indian stock market.
This impressive growth in the mutual fund industry highlights the increasing popularity and trust of investors in these investment vehicles. As the market continues to evolve, it will be interesting to see how the mutual fund industry adapts and innovates to meet the changing needs and performances of investors.
Popularity of Equity Mutual Funds Among Investors
Equity Mutual Funds have gained popularity in recent times. The overall share of equity mutual funds witnessed a marginal increase as it touched 54.1 percent of the industry assets in September 2023, slightly higher than 51.2 percent in September 2022.
Most investors are beginning to see the benefits of mutual funds. As returns from bonds have been consistently going down, retail investors are realizing the importance of participating in equities to generate wealth in the long run. As direct equities are too risky, diversified equities have proven to outperform the benchmark consistently over a longer period of time.
Also, equity Mutual funds are highly tax efficient. ELSS gives you an additional benefit of exemption under Section 80C.
Category-wise Inflow/Outflow of Equity Mutual Funds in 2023
| Fund Type | Total | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|---|
| Multi-Cap Fund | 18293.82 | 4467.35 | 1045.5 | 8157.13 | 4623.84 |
| Large Cap Fund | -2687.19 | 1981.14 | -3359.26 | -2339.58 | 1030.51 |
| Large & Mid-Cap Fund | 16546.17 | 5171.85 | 3018.66 | 4774.12 | 3581.54 |
| Mid-Cap Fund | 21519.98 | 5573.65 | 4735.14 | 6136.55 | 5074.65 |
| Small Cap Fund | 37177.98 | 6932.19 | 10936.69 | 11114.73 | 8194.37 |
| Dividend-Yield Fund | 6159.1 | 3765.86 | 809.55 | 1013.32 | 570.27 |
| Value Fund/Contra Fund | 10658.36 | 2520.43 | 3112.39 | 3358.6 | 1666.94 |
| Focused Fund | -2226.95 | 670.81 | -2093.02 | -1488.88 | 684.13 |
| Sectoral/Thematic Funds | 24835.3 | 8688.06 | 904.85 | 9381.99 | 5860.39 |
| ELSS | 3773.46 | 5080.72 | -918.3 | -759.71 | 370.75 |
| Flexi Cap Fund | 10530.51 | 3914.22 | 165.87 | 2614.2 | 3836.21 |
| Sub Total | 144580 | 48766.29 | 18357.99 | 41962.48 | 35493.59 |
Mid-cap funds invest in companies with strong growth potential but are considered less risky than small-cap funds. Sectoral funds invest in companies of a particular sector. Thorough research and understanding the stages of growth of the sector against the backdrop of the overall cycle are important. Small-cap funds performed extremely well, and the net inflows surged in June.
What Made Small-Cap Funds the Ultimately Favorite Among Investors?
Small-cap mutual funds have delivered impressive returns and are favored by investors for their remarkable returns and potential for large gains. These funds offer diversification and have consistently outperformed large-cap funds. It moves faster than mid and large-cap Cap Funds. These funds tend to invest in companies with promising growth potential.
Data provided by AMFI shows a notable surge in the influx of new capital into small-cap funds. It recorded a historic high of Rs 5472 crore in net inflows in June as compared to Rs 3282 crore in May. On the other hand, well-known equity categories such as Large Cap, ELSS, focused fund, and flexi cap experienced net outflows.
Category-wise Return Comparison of Equity Mutual Funds
| Sr. No | Funds | Category average (YTD) |
| 1 | Multi-Cap Fund | 30.40% |
| 2 | Large Cap Fund | 20.44% |
| 3 | Large & Mid-Cap Fund | 26.97% |
| 4 | Mid-Cap Fund | 34.44% |
| 5 | Small Cap Fund | 38.84% |
| 6 | Dividend-Yield Fund | 31.63% |
| 7 | Value Fund/Contra Fund | 29.87% |
| 8 | Focused Fund | 23.44% |
| 9 | Sectoral/Thematic Funds | 28.76% |
| 10 | ELSS | 26.39% |
| 11 | Flexi Cap Fund | 25.29% |
Conclusion
In the nostalgic realm of Indian finance, the mutual fund industry has journeyed through a remarkable transformation over the past decade. Remember those days when assets under management (AUM) were just a fraction of what they ate now?
From humble beginnings of 8.9 trillion, they’ve skyrocketed to an impressive 49.05 trillion, evoking memories of simpler times.
Ah, the bullish performance of the equity market in 2023! It was like a wave of nostalgia, reminding us of the trust and reliance investors have placed in mutual funds. These were more than just a financial instrument; they were symbols of hope in wealth management.
As we reminisce about the past, we can’t help but marvel at how mutual funds have become indispensable tools in navigating the ever-changing market landscape. They’ve been our companions on this nostalgic journey, offering diversification, and growth prospects, and guiding us toward our enduring financial objectives.
FAQs
Which fund to invest in 2024?
As per the data, Small-Cap mutual funds have outperformed the benchmark and generated good returns. Also, mid-cap funds have shown promising results. But remember, investment decisions depend on various factors, including your financial goals, risk tolerance, investment horizon, and market conditions. It’s important to conduct thorough research or consult with your financial advisor.
Which mutual fund is best for 2023?
Mutual funds are high-risk investments that provide an opportunity to diversify across different asset classes with the potential to generate good returns. But remember, they do not provide guaranteed returns. Here are a few mutual funds to consider:
Which fund is best in equity?
Every investor has a unique set of financial goals, but at the same time, you can follow some thumb rules to pick the right equity fund. Look for a fund that suits your investment objective and risk profile. Compare the risk-adjusted returns of competitive equity funds. Consider the expense ratio, as it also affects the returns. It is observed that the longer you stay invested, the better results you will get. Choosing a fund can be tricky, so perform detailed research and seek professional help as and when needed.
What is better, SIP or equity?
Stock SIP investments offer potentially higher returns; however, the risk is equally higher. On the other hand, a mutual fund SIP ensures portfolio diversification and mitigates risk through professional management. Therefore, mutual fund SIPs are definitely less risky compared to stock SIPs.
