The Indian mutual fund industry sailed through the market turbulence in 2022 with relative ease despite the central bank’s multiple repo rate hikes and significant global headwinds.
The benchmark Nifty index rose 10.87 per cent in the year ended December 19, 2022, far better performance than tech-heavy Nasdaq’s 28.54 per cent drop in one year.
The Reserve Bank of India (RBI) increased the policy repo rate five times this year to 6.25 per cent. Yet, the equities mutual funds continue to be investors favourite.
The number of equities folios rose by 1.10 crore as of November this year. The highest increase in folios was noted in small-cap funds, as it soared by 23.87 lakh folios, data for January-November 2022 period from the Association of Mutual Funds of India (AMFI) showed.
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Strong Performance Of Active Equities
Multi-cap mutual funds, which investments a minimum of 25 per cent in large, mid- and small-cap stocks as per market capitalisation, has been the most popular choice of retail investors, as the net asset under management (AUM) increased by 49.54 per cent from January to November, the highest in active equities. While the net AUM of the sectoral and thematic mutual funds category increased only by 18.75 per cent, they mobilized the highest amount of funds in active equities category, at Rs 59.19 thousand crore.
Massive Inflow Into Passive Funds
Although passive investing has been a popular choice of investment vehicle in the west for quite a while, the Indian retail investors are starting to catch up with the trend, as the net AUM of index mutual funds, soared by 147.88 per cent, the highest increase in any fund category.
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The net inflow of these funds stood at 72.62 thousand crore.
Index mutual funds invest their money in an index. As the fund house decides the weightage of these funds, the expense ratio of these funds is quite low compared to other funds.
The number of index funds rose from 68 to 137 in 11 months, a 101 per cent increase.
Number Of Debt Mutual Funds Falls
The total number of debt mutual fund folios fell by 3.46 lakh. Of the 16 debt mutual fund, the net AUM of 12 debt funds were in the red, while the net AUM of only four debt funds has increased. Liquid mutual funds were the most popular choice as they saw an inflow of Rs 31.79 thousand crore. Short-duration debt mutual funds saw an outflow of Rs 48.43 thousand crore, the highest outflow for mutual funds. Their net AUM fell by 30.90 per cent, followed by corporate bond and floater mutual fund at Rs 39.80 thousand crore and Rs 36.76 thousand crore net outflow, respectively.
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