India’s mutual fund assets swell to record $702 billion on frenetic inflows

The driving force behind this remarkable growth has been the unrelenting inflows into equity mutual funds, which soared 83% month-on-month to 346.97 billion rupees in May.

India’s mutual fund industry is witnessing an unprecedented growth surge, with total assets under management (AUM) soaring to a record 58.6 trillion rupees ($701.90 billion) in May 2024. This represents an astounding addition of nearly 10 trillion rupees in assets in less than a year – the fastest such rise in the sector’s six-decade history.

While it took 50 years for the industry to build its first 10 trillion rupees in assets since its 1964 inception, the latest 9 trillion rupees have been amassed in a mere six months, data from the Association of Mutual Funds in India (AMFI) showed.

The driving force behind this remarkable growth has been the unrelenting inflows into equity mutual funds, which soared 83% month-on-month to 346.97 billion rupees in May, marking the highest level since April 2019. Investors have displayed a clear preference for small- and mid-cap funds during this rally.

The steady stream of domestic investments into equity schemes has reached 5.58 trillion rupees since February 2021, far outpacing foreign inflows over the same period. This sustained retail interest has propelled the benchmark Nifty 50 index nearly 55% higher in the last 39 months.

Contributions to systematic investment plans (SIPs) also hit a new peak of 209.04 billion rupees in May, underscoring the increasing inclination among Indian investors to allocate funds towards market-linked products.

Despite concerns over frothy valuations, inflows into small-cap funds rose 23.4% to 27.25 billion rupees, while mid-cap funds witnessed a 45.3% surge to 26.06 billion rupees last month. Large-cap schemes also saw inflows nearly double to 6.63 billion rupees.

As the mutual fund juggernaut powers ahead, experts cite India’s favourable demographics, rising financial literacy, and the markets’ stellar performance as key tailwinds for this sectoral boom. The industry’s exponential growth trajectory seems primed to maintain its remarkable ascent.