Equity Mutual Funds See Significant Growth in AUM in May
AUM Growth Highlights
On June 10, it was reported that the Assets Under Management (AUM) for equity mutual funds reached Rs 72.2 lakh crore in May, marking a 4.85% increase from approximately Rs 70 lakh crore in April, according to data from the Association of Mutual Funds in India (AMFI).
This rise is primarily driven by favorable market conditions, with both the Nifty and Sensex showing robust performance throughout May.
Amit Bivalkar, Founder Director at Sapient Finserv, noted that the ongoing market momentum and the discipline of Systematic Investment Plans (SIPs) are key factors supporting the growth of AUM.
The AUM in May reflects a modest rise from April but represents a notable 12% increase compared to May 2024.
Narender Singh, smallcase Manager and Founder of Growth Investing, mentioned that open-ended schemes dominate the landscape, accounting for 99.6% of the total AUM, underscoring their enduring appeal to investors.
Investor Activity and Trends
In May, nearly 11.3 lakh new folios were registered, indicating a growing interest from new investors in mutual funds.
While the funds raised in May were similar to those in April, there was a significant rise in redemptions, increasing from INR 32,479 crore to INR 37,591 crore, suggesting that many investors opted to realize profits from recent market gains.
Despite the equity markets maintaining their upward trend in May, the gains were relatively modest, which may have led investors to adopt a more cautious approach.
Among various fund categories, flexicap funds topped the inflow charts with net inflows of Rs 3,841 crore, reflecting investors' preference for funds that can invest across different market segments, allowing them to capitalize on opportunities in large, mid, and small-cap stocks through a single fund.
The small-cap category also performed well, attracting net inflows of Rs 3,214 crore, remaining a popular choice among investors.
Market Sentiment and Caution
Despite its volatility, the small-cap segment continues to draw investor interest due to strong domestic sentiment and potential for long-term returns.
However, the inflow pace into small-cap and mid-cap funds has slowed compared to April, reflecting a more cautious sentiment amid market valuations and global uncertainties.
Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India, advised investors to be mindful of the risks associated with small and mid-cap investments. He emphasized the importance of aligning investments with individual risk tolerance and overall asset allocation to avoid excessive exposure.