Topic 6: MUTUAL FUND: TRANSFORMING REALMS

April 2025 presented a mixed yet insightful picture for India’s mutual fund landscape, marked by impressive equity fund performances, heavy outflows in debt categories, and heightened volatility across several segments. While investors benefited from selective rallies, macroeconomic and geopolitical developments introduced a degree of unpredictability. Leading the performance charts were mid-cap equity funds, which outpaced both large- and small-cap peers. Despite strong returns, mid-cap and small-cap equity funds were among the most volatile, swinging sharply in response to foreign portfolio movements, elevated valuations, and geopolitical concerns. On the debt side, gilt funds emerged as surprise outperformers, riding the tailwinds of falling bond yields. With India’s 10-year government bond yield dropping to a three-year low, top gilt funds offered over 5% returns for the month. Corporate bond funds also registered decent gains of around 3–4%, particularly those exposed to high-quality issuers. Credit risk funds and other rate-sensitive debt categories also faced instability, largely influenced by changing interest rate expectations and RBI’s April rate cut. Meanwhile, sectoral and thematic funds, especially those tied to export-led industries or tech, saw inconsistent flows and returns amid a backdrop of trade policy changes. Multiple macro and policy factors contributed to April's volatility. The month saw foreign investor outflows, particularly in the first half, as global trade tensions and protectionist policies from the U.S. spurred risk-off sentiment. Sluggish GDP growth and muted earnings from certain sectors added to investor caution. Elevated market valuations prompted profit booking, especially in mid- and small-cap segments, while underperformance in specific sectors also weighed on thematic funds. In terms of investor behaviour, equity funds maintained healthy net inflows, with mid-cap, small-cap, and flexi-cap categories drawing the most interest. While large-cap funds saw flat flows, sectoral/thematic funds experienced a dip in net inflows as investors grew more cautious. Conversely, debt funds witnessed significant outflows, especially from gilt, floating rate, and constant maturity schemes. These withdrawals were partly seasonal, driven by advance tax payments, and partly due to shifting interest rate differentials as U.S. bond yields rose. Interest rate fluctuations and persistent inflationary concerns further impacted debt fund valuations. Rising geopolitical tensions—including the India-Pakistan border flare-up—led to a flight to safety, spurring erratic fund flows and market corrections. Hybrid funds had a mixed month. Multi-asset and balanced advantage funds saw steady inflows, while conservative hybrid schemes—heavy on debt allocations—suffered outflows. Meanwhile, passive funds, particularly index ETFs, continued to gain traction among retail investors, signalling a growing preference for low-cost, market-linked strategies.

KEY TAKEAWAYS FROM AMFI INDIA DATA – MARCH 2025

Record Industry AUM: Mutual fund industry assets under management (AUM) reached ₹65.74 lakh crore, up 1.87% month-on-month and 23% year-on-year, marking a more than sixfold increase over the past decade.

Equity Fund Trends: Equity mutual fund inflows dropped 14% to an 11-month low of ₹25,082 crore, reflecting investor caution amid market volatility and global uncertainty, though equity AUM rose to ₹29.5 lakh crore due to market gains and SIPs.

Debt Fund Outflows: Debt-oriented schemes saw significant outflows (over ₹1.6 lakh crore), mainly from liquid funds, as corporates withdrew for quarter-end advance tax payments.

Hybrid and Passive Funds: Hybrid fund AUM grew, led by strong inflows into multi-asset allocation funds. Passive funds hit a record ₹11.47 lakh crore AUM, with net inflows for the 53rd consecutive month.

SIP Growth: SIP collections were robust at ₹25,926 crore, up 34.5% year-on-year, though they declined for the fourth straight month, reflecting cautious sentiment.

Investor Base: Total mutual fund folios reached 23.45 crore, with retail investors (equity, hybrid, solution-oriented schemes) accounting for about 18.58 crore folios

To conclude, April 2025 showcased a dynamic mutual fund environment, where mid-cap and gilt funds stood out as top performers amidst a backdrop of volatility, foreign capital shifts, and shifting investor strategies. The month reaffirmed the importance of diversification, timing, and risk management in navigating India’s evolving investment landscape



Top | Back
The information contained herein (the “Information”) may not be reproduced or disseminated in whole or in part without prior written permission from the Company. The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared based on publicly available information, internally developed data and other sources believed to be reliable. The directors, employees, affiliates or representatives (“Entities & their affiliates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy, reliability and is not responsible for any errors or omissions or for the results obtained from the use of such information. Readers are advised to rely on their own analysis, interpretations & investigations. Certain statements made in this presentation may not be based on historical information or facts and may be forward looking statements including those relating to general business plans and strategy, future financial condition and growth prospects, and future developments in industries and competitive and regulatory environments. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, they do involve several assumptions, risks, and uncertainties. Readers are also advised to seek independent professional advice to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this document shall not be liable in any way for direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of the lost profits arising from the information contained in this material. Readers alone shall be fully responsible for any decision taken based on this document.
Copyright © 2024 Fintso