Buoyant equity market pushes mutual fund AUM near Rs 60 trn in June quarter

Second straight quarter of near double-digit growth

Buoyed by the equity market rally and robust inflows, the mutual fund (MF) industry’s average quarterly assets under management (AUM) registered nearly double-digit growth for the second straight quarter ending June this year.

The average AUM rose by 9 per cent, from Rs 54.1 trillion in the first three months of 2024 to Rs 59 trillion in April-June, according to data from the Association of Mutual Funds in India.

The sequential rise in the previous quarter stood at nearly 10 per cent.

“The growth in MF AUM and the market rally are largely driven by retail investors, who have maintained their confidence in the equity market despite rising valuations. Retail inflows are expected to remain strong in the future,” said Jimmy Patel, chief executive officer (CEO) of Quantum MF.

AUM growth depends on both fresh inflows and the appreciation in the value of assets held in portfolios.

In recent quarters, big gains have been observed on both fronts.

Active equity schemes have seen average monthly inflows of nearly Rs 25,000 crore in the first five months of 2024, compared to Rs 13,465 crore on average for the entire 2023. Hybrid funds and passive schemes also saw increased investments, contributing to the AUM surge.

Passive funds, including exchange-traded funds, index funds, and overseas funds, recorded net inflows of Rs 52,000 crore in the first five months of calendar year (CY) 2024, with monthly inflows averaging Rs 10,408 crore this year, up from Rs 5,910 crore last year.

“The appetite for equities has strengthened, supported by positive indicators such as revenue growth expectations and macroeconomic stability. Retail investors have also matured over time, adhering to their systematic investment plans (SIPs) regardless of market conditions. Strong SIP inflows and institutional flows from the Employees’ Provident Fund Organisation and pension funds have been a major support for the MF industry and the market,” said Hitesh Thakkar, acting CEO of ITI MF, adding that the industry is now assured of close to Rs 30,000 crore in gross inflows through these two streams.

Gross SIP inflows totalled nearly Rs 1 trillion in the first five months of 2024. In CY 2023, total gross inflows were Rs 1.8 trillion.

The market rally, with benchmark indices like the National Stock Exchange Nifty 50 and S&P BSE Sensex rising around 7.4 per cent during April-June, further shored up AUM growth.

Nifty Midcap 100 and Nifty Smallcap 100 indices also posted gains of 16 per cent and 20 per cent, respectively.

Strong inflows enabled MFs to deploy record amounts into the equity market in recent months, with equity purchases in 2024 matching peak levels seen in CY 2022.

MFs have invested Rs 1.83 trillion in equities so far in CY 2024, compared to Rs 1.86 trillion in CY 2022, with the total for the previous year reaching Rs 1.76 trillion, according to Securities and Exchange Board of India data.