Smallcaps are still very popular: AMFI data allays fears of a trend reversal

However, April saw a refreshing change: small-cap funds made a remarkable comeback ₹2,208 crore in net inflows, easing worries of a reversal. In fact, even large caps joined the party and recorded inflows ₹349 crore.

“Both small-cap and mid-cap schemes witnessed notable inflows, reflecting the significant appeal of SMID schemes among investors,” said Abhilash Pagaria, Head, Nuvama Alternative and Quantitative Research.

Still, high valuations have posed a challenge in replicating previous years' returns, underscoring the importance of maintaining a three- to five-year investment horizon to mitigate potential setbacks, he said.

Tata Asset Management's senior fund manager Chandraprakash Padiyar expressed similar views and expressed doubts about sustaining past returns.

However, he is optimistic about the potential for decent earnings growth among small and medium-sized companies with promising growth opportunities in manufacturing, logistics and supply chain, supported by initiatives such as Make in India and manufacturing-related incentive schemes.

While Padiyar expects a favorable risk-reward ratio for the broader market, driven by sustainable earnings growth over the next five years.

However, a section of experts felt that some consolidation may be required to ensure that the market is on a healthy path.

Tributaries and schemes

However, data from the Association of Mutual Funds in India (AMFI) showed that overall equity fund inflows declined by 16.4% in April ₹18,917 crore as compared to ₹Inflows into equity funds were positive for the 38th consecutive month at Rs 22,633 crore in the previous month.

While equity schemes saw a steady inflow in April, it was also the lowest inflow in four months, Pagaria said. “Although inflows slowed compared to previous months, the fluctuations are not unexpected.”

According to Nirav Karkera, Head of Research at Fisdom, a Bengaluru-based WealthTech startup, following the stress test result, there was a subtle shift among investors and a new sense of confidence due to greater transparency and assurance of well-managed funds.

One reason for the robust capital inflows is contributions from systematic investment plans (SIPs), which were at an all-time high ₹20,371 crore in April on the other hand ₹19,270 crore in March. In April, the number of SIP accounts touched a new high of 8,70,11,401, surpassing the March level (8,39,71,299).

The assets under management (AUM) of SIPs also hit an all-time high ₹11,26,128.67 crore, against ₹10,71,665 crore in March. Also, MF folios reached a record 18,14,68,286.

The inventory of retail mutual funds comprising equity, hybrid and solution-oriented schemes touched a record high of 14,53,57,892 in April. In March, the folio count was 14,24,42,823. Retail AUM was at ₹32,82,225 crore in April.

Still, Padiyar said diversified funds are a better choice than sectoral or thematic funds in the long run, especially when valuations are higher.

In April, mutual fund AUM rose 7% ₹56.99 trillion, against ₹53.12 trillion in the previous month. In April, only nine new, open-ended fund offerings were launched, which ensured the corresponding mobilization ₹1,532 crore.

KYC raid

Venkat Chalasani, chief executive officer, AMFI, said the decline in mutual fund inflows in April was not due to the KYC compliance issues.

While 93% of mutual fund accounts had either validated or registered in Know Your Customer (KYC) status, only 3% of accounts are currently in KYC Hold status.

“With KYC norms coming into effect from April, the MF industry is addressing concerns about a smooth process. Together with AMCs, distributors and other stakeholders, we are committed to enabling a seamless KYC validation process for all, thereby ensuring the integrity and accessibility of mutual fund investments across the board,” he added.

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Published: May 09, 2024 12:55 PM IST