Equity mutual fund inflows jumped 13.5% in December, reflecting robust investor optimism in India’s market story. While mutual funds offer a disciplined path to wealth creation through professional management and diversification across a 20-25 stock portfolio, becoming wealthy requires consistent long-term investment with 12-15% annual returns and proper risk management.
What changed
Retail investors are showing greater risk tolerance, maturity, and a preference for “buy on dips” strategies. Despite 14 negative closes by Sensex and Nifty over 36 months (Dec 2022–Nov 2024), Systematic Investment Plan (SIP) inflows increased in over 71% of those months.
For instance, even with a 3.54% sensex drop in September 2022, SIP collections rose to Rs. 12,976 crore from Rs. 12,693 crore in August. Similarly, in October 2024, a 6% market decline saw SIP collections climb to Rs. 25,323 crore, up from Rs. 24,509 crore the prior month.
Venkat Chalasani, Chief Executive, AMFI said, “Despite volatile market conditions, equity-orientated schemes continued to see strong inflows. This behaviour highlights the growing maturity of investors.
The SIP contribution reached an all-time high of Rs. 26,459.49 crore in December 2024, reflecting investors steadfast commitment to their financial goals. The record-breaking 22.50 crore mutual fund folios in December underscore investors confidence in the industry’s ability to deliver long-term value despite short-term fluctuations.”
What is the trend?
In December 2024, the Indian mutual fund industry saw a notable increase in net equity inflows, reaching Rs. 41,136 crore compared to Rs. 35,927.3 crore in November. While large-cap funds experienced a decline in inflows from Rs. 2,547.9 crore to Rs. 2,011 crore, small-cap and mid-cap funds displayed positive momentum.
Specifically, small-cap funds attracted Rs. 4,668 crore, up from Rs. 4,112 crore in November, and mid-cap funds saw inflows rise to Rs. 5,093 crore from Rs. 4,883.4 crore in the previous month. This data indicates a growing investor preference for mid- and small-cap segments despite overall market conditions.
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Which themes are gaining more traction?
According to the December 2024 mutual fund data from AMFI, there were notable changes across different fund categories. ELSS fund inflows decreased significantly from Rs. 618.5 crore in November to Rs. 188 crore in December. However, sectoral/thematic funds showed remarkable growth, with inflows doubling from Rs. 7,658 crore to Rs. 15,331.5 crore.
ETF inflows saw a decline, dropping from Rs. 1,531.2 crore to Rs. 784.3 crore. Meanwhile, credit risk funds experienced increased outflows, with Rs. 356 crore flowing out in December compared to Rs. 196 crore in November, indicating a possible shift in investor risk appetite or year-end portfolio adjustments.
What about debt instruments?
A debt instrument is like an IOU where the borrower repays the principal and interest at set times. It’s used to fund needs like business expansion or government projects. Types include bonds, debentures, loans, mortgages, and credit facilities like credit cards and lines of credit.
In December, mutual funds saw debt outflows of Rs. 1.27 lakh crore, a sharp reversal from the Rs. 12,915 crore inflow in November. Of the 16 debt sub-categories, only medium-to-long-duration, gilt, and long-duration funds recorded inflows of Rs. 151 crore, Rs. 343 crore, and Rs. 680 crore, respectively.
Written By Fazal Ul Vahab C H
Disclaimer
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