Equity Schemes Ride High With 14.5 Per Cent MoM Increase In Inflow; Thematic, Mid- And Small-Cap Segments Soar: AMFI Data

The latest data from the Association of Mutual Funds in India (AMFI) shows a robust net inflow into equity-oriented funds, amounting to Rs 41,155.91 crore in December 2024, reflecting a 14.5 per cent increase compared to the previous month. In contrast, debt-oriented schemes experienced a net outflow of Rs 1,27,152.63 crore.

Within equities, the highest inflows were observed in thematic, and mid- and small-cap funds. The thematic funds received a net inflow of Rs 15,331.54 crore, mid-cap funds Rs 5,093.22 crore, and small-cap funds Rs 4,667.70 crore.

The total number of folios in equity-oriented funds grew to 15,74,96,827 as of December 31, 2024, compared to 11,29,92,595 folios as of December 31, 2024, showing around a 36 per cent increase over the year.

Source: AMFI

However, the question is why only equity schemes saw inflows whereas debt schemes witnessed a sharp outflow. Here is what experts say:

Ashwini Kumar, Senior Vice President and Head of Market Data at ICRA Analytics says, “The domestic mutual fund industry has showcased resilience backed by a sense of optimism regarding the growth prospects of the Indian economy, strong participation from retail investors, broadening investor base and growing interest and awareness among investors from smaller cities regarding mutual funds. The structural growth story of the Indian economy remains intact, and India is in a bright spot in the global economy and this will augur well for retail investors. We expect higher inflows to sustain moving forward”. 

Anand Vardarajan, Chief Business Officer, Tata Asset Management, states, “Sectoral funds continue to shine with NFOs driving the bulk of the flows. Equity mutual funds have seen strong flows across categories, and investors seem to have bought into the market correction in December. Arbitrage funds saw some strong flows in December at Rs 20,000 crores, while the rest of the schemes in the hybrid category didn't see much investor interest.

On debt outflow, he explains, “Debt has been negative across categories, with the most impact in liquid and ultra-categories, primarily due to quarter-end outflows and tax payments”.

Jatinder Pal Singh, CEO, ITI Mutual Fund, describes the reason for this strong inflow in equities, “Despite muted equity market performance during December 2024, inflows in open-ended equity funds stayed in the positive zone for the 46th month in a row. Gross Inflows into active equity schemes were up 17 per cent in Dec 2024 compared to the previous month. This increase can be attributed to the 70 per cent absolute growth in gross inflows into sectoral/thematic equity schemes, most of which can be attributed to NFOs. Inflows in the large-cap category were down by 8 per cent month on month while net flows were down 21 per cent compared to November 2024”.

According to him, the net outflow from the debt mutual fund was due to quarter-end phenomena. 

Sanjay Bembalkar, Head-Equity, Union Asset Management Company Private Limited, explains, "The equity-oriented categories have seen positive flows for the month which underscores the maturity of Indian investors and behaviour change considering the backdrop of market volatility and economic slowdown. Mid-cap and small-cap categories combined have seen inflows of Rs 9,761 crores, which are at a new monthly high since April 2019. The trajectory of gross SIP flows is quite encouraging at Rs 26,459 crores, which is up 50.2 per cent y-o-y. These numbers indicate a structural change in investing culture, thought process maturity, and awareness among investors.”

In December 12 index funds, two exchange-traded funds (ETFs), and 13 equity-oriented funds were launched. Besides that, three new fund offers were in the hybrid scheme category, one was in a solution-oriented fund, and three were in the debt-oriented category.