India's Mutual Fund Assets Surge to Rs 58.3 Trillion in May

Photo : Reuters

India’s mutual fund assets surged to 58.6 trillion rupees ($701.90 billion) in May, marking a historic milestone and nearing a remarkable 10 trillion rupee increase in less than a year. This rapid ascent stands as the fastest rise on record for the Indian mutual fund industry, according to data released on Monday.

From its inception in 1964, it took the fund industry five decades to accumulate the first 10 trillion rupees in assets. However, in a testament to its recent momentum, the industry has added the last 9 trillion rupees in assets in less than six months.

The month of May witnessed an 83% month-on-month surge in inflows into equity mutual funds, totaling 346.97 billion rupees. Investors continued to show a preference for small- and mid-cap stocks, as highlighted by data from the Association of Mutual Funds in India (AMFI).

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May recorded the highest net equity mutual fund inflows since April 2019, reflecting the confidence and enthusiasm among investors. Notably, domestic equity mutual funds have consistently seen net inflows every month since February 2021, amounting to 5.58 trillion rupees, surpassing net foreign inflows during the same period.

The buoyancy in mutual fund inflows has been a contributing factor to the 55% rise in the benchmark NSE Nifty 50 over the past 39 months.

Despite concerns regarding high valuations, inflows into small-cap stocks increased by 23.4% to 27.25 billion rupees in May, while mid-cap fund inflows surged by 45.3% to 26.06 billion rupees. Large-cap stocks also witnessed a significant uptick in inflows, nearly doubling to 6.63 billion rupees.

Feroze Azeez, Deputy Chief Executive at Anand Rathi Wealth, attributed the significant inflows into small- and mid-cap categories to their growth potential. Stress tests have indicated no liquidity stress in these categories, providing reassurance to investors and encouraging sustained allocations.

In May, while the benchmark Nifty 50 and small-cap stocks experienced marginal declines of 0.33% and 1.85%, respectively, mid-cap stocks rose by 1.65%.

Additionally, contributions to systematic investment plans (SIPs) reached a record high of 209.04 billion rupees in May. Sectoral and thematic fund inflows also surged to a record 192.13 billion rupees during the month, driven by heightened interest in New Fund Offers (NFOs).

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