|
The Indian equity mutual fund market experienced a significant downturn in November 2024, witnessing a 14.19% month-on-month decrease in inflows. This decline, resulting in a total of Rs 35,943.49 crore in inflows, is attributed to a confluence of global and domestic factors. Weak global cues, primarily stemming from China's economic slowdown and the ongoing geopolitical tensions between Ukraine and Russia, created a climate of uncertainty that dampened investor enthusiasm. These global uncertainties, coupled with a 5-6% correction in the domestic equity markets during October, further contributed to investor hesitancy. The subsequent US elections and several state assembly elections in India further added to the prevailing atmosphere of caution, prompting many investors to adopt a wait-and-see approach until greater clarity emerged regarding the political and economic landscape.
Despite the month-on-month decline, a positive aspect revealed by the Association of Mutual Funds in India (AMFI) data is the robust year-on-year growth. Inflows into equity mutual funds surged by an impressive 131.35%, climbing from Rs 15,536.42 crore in November 2023 to Rs 35,943.49 crore in November 2024. This substantial increase underscores the persistent interest among retail investors in equity investments, indicating a sustained belief in the long-term growth potential of the Indian economy. Experts like Ashwini Kumar, senior vice-president and head of market data at ICRA Analytics, highlight this continued faith in the Indian market as a crucial factor underpinning the strong year-on-year performance, despite the temporary setback in November.
The overall mutual fund industry also experienced a considerable drop in total inflows during November 2024. AMFI data reveals a staggering 74.86% month-on-month decline, with inflows plummeting from Rs 2,39,828.69 crore in October to Rs 60,295.30 crore in November. However, similar to the equity sector, year-on-year growth remained significantly positive, with a 135.38% increase compared to November 2023. This pattern suggests that while short-term market fluctuations impact investor sentiment, the long-term outlook for the Indian mutual fund industry remains optimistic. The performance of different fund categories further illustrates this nuanced picture. While large-cap and sectoral/thematic funds registered month-on-month decreases of 26.20% and 37.63% respectively, small-cap and mid-cap funds showcased resilience, with growth of 9% and 4.3% respectively. This divergence may suggest a shift in investor preferences toward smaller companies perceived to offer higher growth potential despite the broader market uncertainty.
A critical factor mitigating the overall negative impact of the November downturn is the consistent performance of Systematic Investment Plans (SIPs). SIPs, a method of regular investing, remained remarkably steady, exceeding Rs 25,000 crore for the second consecutive month. This sustained level of SIP contributions, reaching Rs 25,320 crore in November, reinforces the notion that investor confidence in the long-term prospects of the Indian economy remains strong. Deepak Ramaraju, a senior fund manager at Shriram AMC, attributes the investor caution to the October market correction and the subsequent political events, but emphasizes that the continued strength of SIPs signifies unwavering belief in the ‘India growth story.’ This unwavering faith is further supported by the total Asset Under Management (AUM) of the mutual fund industry, which reached Rs 68.08 lakh crore in November, exceeding October's figure of Rs 67.25 lakh crore. This continued growth in AUM demonstrates the resilience of the Indian mutual fund industry in the face of temporary market volatility.
In conclusion, the November 2024 data paints a complex picture of the Indian equity mutual fund market. While short-term factors led to a significant month-on-month decline in inflows, the robust year-on-year growth and the consistent strength of SIPs highlight the enduring confidence of retail investors in the long-term potential of the Indian market. The performance across different fund categories indicates a shift in investor strategies, with smaller-cap funds attracting more investment despite overall market uncertainty. The continued increase in AUM further reinforces the resilience and growth trajectory of the mutual fund industry as a whole. The interplay of global and domestic factors will continue to shape investor sentiment in the coming months, but the fundamental strength of the Indian economy, coupled with disciplined investment strategies like SIPs, suggests a promising outlook for the future.
Source: Equity mutual funds witness 14 per cent drop in inflows in November