Key Points
Mutual fund inflows facing near-term volatility
SIP investments remain stable at Rs 260 billion
Asset management sees potential growth beyond top 30 cities
Market sentiment remains cautiously optimistic
The inflows will only get healthy in the medium term led by higher participation from the retail segment, higher understanding of market volatility and rising investment discipline along with incrementally higher inflow from beyond Top 30 cities.
"The recent correction in select AMC stocks have placed them in attractive buckets," InCred Equities said.
The Asset Under Management in mutual funds in February 2025 declined by 1 per cent month-on-month to Rs 68 trillion, amid softer equity fund inflow, among others.
The capital market volatility typically hurt inflow, as seen in subdued gross equity fund inflow and new SIP registrations -- although gross SIP inflow was healthy at Rs260 billion.
"We expect the volatility to stay in the near term, mainly led by global events. However, we remain optimistic in the long run amid rising market penetration," said InCred Equities' note.
There has been some dampness in the sentiment as gross inflow in equity schemes declined to an 11-month low in February 2025, although the gross outflow remained low, indicating that investors continue to remain patient even amidst the noise.
Volatility has been high in recent months, especially in the erstwhile leapfrogging small-cap and mid-cap indices witnessing a sharp decline of 14-18 per cent so far in 2025. However, according to InCred Equities, another indicator of rising financial discipline is a small decline of 1.5 per cent month-on-month in systematic investment plan or SIP inflow which managed to remain high at Rs 260 billion.
"We expect the volatility to continue in the near term, but we remain optimistic over the mid-to long-term horizon amid improving geographic penetration as well as the rising popularity of mutual fund schemes, mainly among the young and mid-income investors," it added.
