Small-cap Funds Reach All-Time High: Net Inflows Soar by 66% to Rs 5,471.75 Crore!

A record-breaking surge in equity inflows as small-cap funds reach an all-time high, reflecting investor confidence and highlighting India's market recovery.

Equity inflows remain strong

Inflows into the Indian equity market experienced a remarkable surge, more than doubling to reach Rs 8,637 crore in June, driven by an increase in net investments in small-cap funds. This substantial growth in equity inflows marks the 28th consecutive month of positive performance in this sector, reflecting a solid recovery for the Indian market since March. The BSE Sensex has witnessed a 7% rise since the beginning of the year, with a 0.7% increase in June alone.

  • Equity inflows skyrocket by over 100% to Rs 8,637 crore, setting a record-breaking surge.
  • Small-cap funds hit an all-time high, attracting a staggering Rs 5,471.75 crore in June alone.
  • Large-cap funds witness outflows of Rs 2,049.61 crore, while small-caps steal the show.
  • New fund offers contribute Rs 3,038 crore to the massive equity inflows in June.

Small-cap funds lead the way

Small-cap funds took the lead, attracting significant attention and experiencing a substantial 66% month-on-month surge to Rs 5,471.75 crore in June. This surpassed the previous record set in May 2023, indicating a robust investor appetite for smaller companies. Both the small-cap and mid-cap indices displayed considerable growth during this period.

Investors' confidence in equities

Investors' confidence in the market's recovery and favourable earnings prospects was reflected in the positive trend of equity inflows. Sustained foreign fund inflows and improved economic conditions were identified as driving factors behind the market's performance.

Large-cap funds witness outflows

Conversely, large-cap funds experienced net outflows of Rs 2,049.61 crore in June as investors shifted their focus towards small-cap and mid-cap funds. Concerns about valuations and the challenge of deploying large sums of money without impacting performance may have contributed to this change in investor preference.

Also Read Popular sectors in which small-cap funds invest. Does your fund have the exposure?

NFOs boost equity inflows

New fund offers (NFOs) played a significant role in the surge of equity inflows, contributing Rs 3,038 crore in June out of the total net inflows. Noteworthy NFOs, such as Baroda BNP Paribas Value Fund, HDFC Defence Fund, and Quant BFSI Fund, attracted substantial investments during the month.

Debt funds experience outflows

In contrast to the flourishing equity funds, debt-oriented schemes faced a shift in sentiment, witnessing net outflows of Rs 14,136 crore in June. This can be attributed to corporates making advance tax payments at the end of the quarter. The Liquid and Ultra Short Duration categories were particularly affected by these outflows.

Gold ETFs maintain appeal

Gold exchange-traded funds (ETFs) maintained their appeal, attracting net inflows of Rs 70.32 crore in June. Although slightly lower than in May, the pullback in gold prices during the latter half of May provided investors with a buying opportunity. Investors perceive gold ETFs as a haven during uncertain times, given the persistent risks facing developed economies.

Final thought

The robust increase in equity inflows and the surge in small-cap fund investments demonstrate investors' confidence in the Indian market's recovery and future prospects. While large-cap funds faced outflows, the overall market sentiment remains positive, driven by sustained foreign fund inflows and favourable economic conditions.

Find the latest articles on mutual funds here.

Also Read The Hidden Gems: Discover the Small-cap Funds that Grew 12 Times in a Decade

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.



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