India’s Mutual Fund Assets Soar to 58.6 Trillion Rupees in May, Marking Record Growth

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India’s mutual fund industry achieved a significant milestone in May, with assets rising to 58.6 trillion rupees ($701.90 billion).

This remarkable growth brings the industry close to adding 10 trillion rupees in under a year, marking the fastest increase on record, according to data released on Monday.

Historic Growth in Asset Accumulation

The mutual fund industry, which took five decades to amass its first 10 trillion rupees since its inception in 1964, has astonishingly added the last 9 trillion rupees in less than six months.

Surge in Equity Mutual Fund Inflows

Equity mutual funds witnessed an 83% month-on-month increase in inflows, reaching 346.97 billion rupees in May.

Investors have shown a strong preference for small- and mid-cap funds, as indicated by the data from the Association of Mutual Funds in India (AMFI).

Notably, the net equity mutual fund inflows in May represent the highest on record since April 2019, when AMFI began reporting monthly mutual fund flows in their current format.

Consistent Inflows and Market Impact

Since February 2021, domestic equity mutual funds have experienced net inflows every month, totaling 5.58 trillion rupees. This figure surpasses net foreign inflows over the same period.

The benchmark NSE Nifty 50 index has climbed approximately 55% over the last 39 months, driven by these mutual fund inflows.

Small- and Mid-Cap Funds Attract Investors

Despite concerns about high valuations, small-cap fund inflows 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 funds also saw a significant rise, with inflows nearly doubling to 6.63 billion rupees.

“Over the last year, small- and mid-cap categories attracted significant inflows due to their growth potential,” said Feroze Azeez, deputy chief executive at Anand Rathi Wealth. “Stress tests have indicated that there is no liquidity stress in the two categories, comforting investors and spurring continuous allocations.”

Market Performance and SIP Contributions

In May, the benchmark Nifty 50 and small-cap indexes fell by 0.33% and 1.85%, respectively, while mid-caps rose by 1.65%.

Additionally, contributions to systematic investment plans (SIPs) reached a record high of 209.04 billion rupees in May.

Record Inflows in Sectoral and Thematic Funds

Sectoral and thematic funds experienced a record inflow of 192.13 billion rupees in May, driven by strong interest in New Fund Offers (NFOs).