Midcap schemes score over large, smallcaps on net inflows in 2021

Total assets under management in the open-ended equity fund space on December 2021 were Rs 13.33 trillion, up almost 47% over the year-ago period

Flows into the equity funds remained strong throughout the last calendar year, as investors continued to invest in the rising markets. However, midcap funds scored over largecap and smallcap funds with higher net inflows.

The data from Morningstar shows that net inflows in midcap funds for 2021 aggregated to Rs 10,588 crore compared with net inflows of Rs 538 crore in 2020. While net inflows for largecap and smallcap funds in 2021 gathered Rs 2,877 crore and Rs 3,833 crore respectively.

Total assets under management (AUM) in open-ended equity funds as of December 2021 stood at Rs 13.33 trillion, up almost 47 per cent over December 2020.

“Strong flows through the year 2021 (Rs 96,669 crore) along with strong market performance across all market caps, have resulted in the phenomenal rise in assets over the last year. Equity funds form about 35.9 per cent of the total open-ended fund universe, up marginally from 35.4 per cent in the previous quarter,” said the Morningstar in its report.

Under the largecap category, funds with the highest inflows in 2021 were Axis Bluechip fund (Rs 6,740 crore), followed by Canara Robeco Bluechip fund (Rs 3,686 crore), and Mirae Asset Large Cap (Rs 2,682 crore).

The funds with the highest net outflows in 2021 were ICICI Prudential Bluechip (Rs 2,822 crore), followed by Aditya Birla Frontline Equity and Nippon India Large Cap with outflows of Rs 2,811 crore and Rs 2,373 crore, respectively.

In the year 2021, S&P BSE Sensex Index was up by nearly 22 per cent, while S&P BSE Midcap Index and BSE S&P Smallcap Index gained 39.18 per cent and 62.77 per cent respectively.

Market participants say that investors preferred midcap funds in 2021 because they were less volatile compared to smallcap funds and gave higher returns than largecap funds.

In midcap category funds with the highest net inflows in 2021 were Axis Midcap fund (Rs 4,263 crore), followed by Kotak Emerging Equity fund (Rs 3,791 crore) and PGIM India Midcap Opportunities (Rs 2,625 crore).

While the funds with the highest net outflows in 2021 were HDFC Midcap Opportunities (Rs 2,664 crore), followed by Franklin India Prima and L&T Midcap with Rs 1,408 crore and Rs 1,143 crore, respectively.

Industry officials say that going forward investors should lower their returns expectations as there will be a lot of volatility due to the likely interest rate hike from Fed, rising crude prices and geopolitical risks.

“The past 18-24 months have been a one-way street for the markets. The intoxicating returns has somewhat numbed the investor, advisor and portfolio managers to impending risks, as every correction in hindsight has been an opportunity to buy into and compound returns. Hence, at this juncture it makes a lot of sense to highlight the risks to not just the investor and advisor but also to oneself,” said Aniruddha Naha, head-equity, PGIM India Mutual Fund.