 "Redemptions from equity funds increase by 40% to Rs 4,645 billion in 2024")
The assets under management (AUM) of domestic mutual funds surged by 40 per cent year-on-year (YoY) to reach Rs 33.4 trillion in calendar year (CY) 2024, marking the 11th consecutive year of growth, according to an analysis by Motilal Oswal Fund Folio Report. Redemptions from equity funds also rose by 40% YoY to Rs 4,645 billion, indicating a growing trend of investors pulling out their investments amid market corrections.
The rise in AUM was driven by an uptick in market indices and robust sales in equity schemes, contributing to an overall boom in the sector despite some headwinds. The total AUM of the mutual fund industry also saw significant growth, increasing by 32% YoY to Rs 66.9 trillion by the end of December 2024, said the report.
Key Drivers of Growth
- Strong Equity Scheme Sales: Sales of equity schemes surged by 69% YoY to Rs 9,120 billion in CY24. Despite market volatility, investors continued to place confidence in equity-based funds.
- Systematic Investment Plans (SIPs) Surge: SIP contributions in December 2024 alone reached a new high of Rs 264.6 billion, marking an increase of 50.2% compared to the same period last year.
Market Indices and Sales Patterns
Nifty Performance: Despite the rising equity AUM, market indices such as the Nifty-50 witnessed a modest 9% YoY increase in 2024, with a 2% MoM decline in December 2024.
Redemptions Increase: Redemptions from equity funds also rose by 40% YoY to Rs 4,645 billion, indicating a growing trend of investors pulling out their investments amid market corrections. However, this was offset by a massive increase in net inflows, which grew more than double YoY to Rs 4,475 billion in CY24, an all-time high for the sector.
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Total Mutual Fund Industry AUM
AUM Breakdown: The mutual fund industry’s total AUM grew by 32% YoY to Rs 66.9 trillion in CY24. This growth was powered by a diverse mix of funds, with equity funds contributing the largest share at Rs 9,537 billion. Other contributors included liquid funds (Rs 1,727 billion), balanced funds (Rs 1,533 billion), ETFs (Rs 1,424 billion), and income funds (Rs 954 billion).
Equity Funds Lead the Charge: Among various categories, equity funds saw the highest growth, both in terms of sales and value. Liquid funds, however, saw a MoM decline in December 2024, leading to a 1.7% decrease in the total AUM of the mutual fund industry in that month.
Monthly Trends and Market Fluctuations
December 2024 Trends: In December, the total AUM of mutual funds dropped 1.7% MoM to INR 66.9 trillion. However, equity funds continued to show resilience, with an increase of INR 235 billion in their AUM.
SIP Contributions: The continued popularity of SIPs is evidenced by the growth in monthly contributions, which saw a MoM rise of 4.5% from Rs 253.5 billion in November 2024 to Rs 264.6 billion in December 2024.
Sector-Wise Performance
Healthcare, Retail, and Consumer Durables: In December 2024, mutual funds showed increased interest in sectors such as Healthcare, Retail, Consumer Durables, Technology, and Real Estate. These sectors saw a rise in their weightage in the portfolios of mutual funds, reflecting investor confidence in these areas despite broader market volatility.
Private Banks and Technology: Private Banks remained the largest sector holding in mutual funds, comprising 16.6% of the total sector weight. Technology was another prominent sector, with mutual funds holding 9.4% in this category. Sectors such as Consumer, Oil & Gas, and Metals saw a decrease in their sectoral weightages.
MF Ownership vs BSE 200 Index
Under-Owned Sectors: Certain sectors remained under-owned by mutual funds compared to the BSE 200 Index. These included Consumer, Oil & Gas, Private Banks, Technology, and Utilities. Despite a rising trend in market interest, these sectors have seen limited exposure from mutual funds.
Over-Owned Sectors: In contrast, sectors like Healthcare, Capital Goods, Consumer Durables, and Chemicals saw greater MF ownership compared to their representation in the BSE 200 index. Healthcare, in particular, stood out with 16 funds over-owned relative to the benchmark.
Mutual Fund Activity in Nifty-50 Stocks
Equity Buying Trends: Domestic mutual funds continued to be net buyers in the Nifty-50 stocks in December 2024, purchasing equities in 56% of the index’s constituent stocks. Among the top stocks purchased were Cipla (+10.6%), SBI Life Insurance (+7.1%), and IndusInd Bank (+5.7%).
Midcap and Smallcap Stock Activity: In the Nifty Midcap-100 and Smallcap-100 indices, mutual funds were also net buyers in 60% and 53% of stocks, respectively. Significant buying activity was observed in Yes Bank, HUDCO, Tata Elxsi, and Godrej Properties in the midcap space, while Signature Global, Mahanagar Gas, and CPCL attracted interest in the smallcap space.
Performance of Top Mutual Fund Schemes
NAV Declines: Among the top 25 schemes by AUM, a majority experienced a decline in net asset value (NAV) in December 2024. Notable losers included HDFC Large Cap Fund, ICICI Pru Bluechip Fund, and SBI Bluechip Fund, which posted MoM NAV declines of 2%, 2%, and 1.8%, respectively.
Value Surprises in the Market
Top Gainers: In terms of value change, the biggest winners in December 2024 were Sun Pharma, Cipla, Trent, and Lupin, which saw substantial MoM increases in stock value.
Declining Banking Stocks: Conversely, banking stocks such as HDFC Bank, ICICI Bank, and SBI, along with other large-cap names like Reliance Industries, TCS, and Axis Bank, witnessed significant declines in value.