New Delhi: Mid and small cap mutual fund schemes have continued to attract strong investor interest, garnering nearly Rs 30,350 crore in inflows during the April-September period of the current financial year, driven by the impressive returns generated by these segments . In comparison, the cumulative inflow into mid-cap and small-cap funds stood at Rs 32,924 crore during the same period last year, according to data from the Association of Mutual Funds of India (AMFI).
The entry trend persists despite concerns raised by the market regulator. SEBI on increasing inflows into small and mid-cap funds as experts believe investors will continue to favor these categories for their potential to generate high returns.
“Small caps will continue to grow at a faster pace in the coming years. I expect inflows to continue as Indians want to invest in high growth sectors. Small cap funds should be seen as an integral part of the allocation portfolio and not a tactical play,” Trust Mutual Fund CEO Sandeep Bagla told PTI.
Individually, mid-cap funds recorded an inflow of Rs 14,756 crore and small-cap funds attracted Rs 15,586 crore in H1FY25. This adds up to the total inflow to Rs 30,342 crore, the data showed .
Strong investor interest in mid-cap and small-cap mutual funds is driven by the potential for high returns in these segments, Tradejini COO Trivesh said.
The mid-cap and small-cap indices have posted gains of around 20 per cent and 24 per cent, respectively, this financial year, outperforming both the Nifty and large-cap indices. While the previous year saw even higher returns leading to higher capital inflows, current performance continues to attract investor interest.
Additionally, the March 2024 stress test also played a role, bolstering confidence by ensuring that fund managers are prepared to handle market volatility, said Feroze Azeez, deputy chief executive officer at Anand Rathi Wealth Ltd.
“With the midcap and smallcap segments expected to grow 20 per cent and 25 per cent, respectively, in FY25, we expect inflows to remain strong, especially as SIP inflows continue to reach new highs,” he said.
Additionally, corporate earnings will boost flows in these categories.
Last year, mutual funds launched new fund offerings (NFOs) of thematic funds and new fund management strategies in the passive fund management space. If these NFOs outperform the overall market, we may see incremental flows moving into those categories, said Manish Kothari, co-founder and CEO of ZFunds.
If there is a correction in the broader markets, we may see flows in mid-cap and small-cap category mutual fund schemes fall, he added.
Large cap mutual funds saw an inflow of over Rs 7,067 crore in the April-September period of FY25 after witnessing an outflow of Rs 5,700 crore in the same period of FY24.
In line with the rise in inflows, the number of investors (folios) in the two schemes shot up by 1.32 crore year-on-year to nearly 4 crore in the six-month period ending September 30, 2024. .
“With the number of folios increasing, we see increasing confidence in the performance of these funds, despite regulatory cautions,” said Tradejini’s Trivesh.
Overall, assets of the two categories of mid-cap and small-cap schemes rose 63 per cent to Rs 7.26 lakh crore at the end of September 2024 from Rs 4.44 lakh crore a year earlier.
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