Large, mid-cap funds’ AUM soars 5x in 5 years, likely to see increased activity amid market volatility: ICRA Analytics

As domestic markets navigate heightened volatility due to rising geopolitical risks and global uncertainties, large and mid-cap funds are expected to attract significant investor interest, according to ICRA Analytics. These funds offer the dual benefits of portfolio diversification and the potential for attractive returns, making them particularly appealing amid current market turbulence. Over the past 5 years, large and mid-cap funds have experienced substantial growth, with Assets Under Management (AUM) increasing more than 5-fold from US$ 5.96 billion (Rs. 0.50 lakh crore) in July 2019 to US$ 30.62 billion (Rs. 2.57 lakh crore) in July 2024. Their compound annualized returns are 44.07% for 1 year, 21.85% for 3 years, 23.67% for 5 years, and 16.40% for 7 years. Additionally, the number of folios has surged by 126% to 100.78 lakh in July 2024 from 44.55 lakh in July 2019, highlighting the growing investor interest.

Despite market challenges, the Indian mutual fund industry has seen notable inflows, with net inflows rising by 130% to US$ 22.52 billion (Rs. 1.89 lakh crore) in July 2024, up from US$ 9.78 billion (Rs. 82,046 crore) the previous year. Net AUM also grew by 40%, nearing US$ 774.45 billion (Rs. 65 lakh crore). Equity mutual funds saw a dramatic increase in inflows, surging over 4 times to US$ 4.42 billion (Rs. 37,113 crore) in July 2024 from US$ 908.6 million (Rs. 7,626 crore) in July 2023, driven by strong investor confidence in India's financial market and economic outlook. Sectoral and thematic funds have attracted US$ 2.19 billion (Rs. 18,386 crore) in inflows but come with sector-specific risks. Senior Vice President and Head of Market Data at ICRA Analytics, Mr. Ashwini Kumar, advises that while sectoral funds can be sensitive to sector-specific challenges, diversified funds provide better protection against such risks. Large and mid-cap funds are expected to remain attractive for those seeking stability and growth in a volatile market environment.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.