Large-cap mutual funds infuse Rs 1,287 crore in Jan on profit booking

Investors flocked to large-cap oriented mutual funds with influx of Rs 1,287 crore in January, making it the highest fund infusion in 19 months, as a significant run-up in small and mid caps prompted them to book profit.

This is a huge turnaround following a net outflow of Rs 281 crore in December. Also, the quantum was 80 per cent higher than inflows of Rs 716 crore in January last year.

The latest inflow helped push the asset base of large-cap equity category by 26 per cent to Rs 3 lakh crore at January-end from Rs 2.38 lakh crore a year ago.

According to latest data by Association of Mutual Funds in India (Amfi), equity mutual funds focused on large-cap received inflow to the tune of Rs 1,287 crore in January. This was the highest level since July 2022, when the category saw an inflow of Rs 2,052 crore.

Given the significant run-up in small and mid caps, investors are booking some profits and rebalancing into large-caps, Kaustubh Belapurkar, Director - Manager Research at Morningstar Investment Research India, said.

Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC, said,"Large- caps demonstrated positive contributions in January, reversing the net outflows experienced in December 2023. This shift in trend is in line with valuation differentials among large v/s mid and small caps, suggesting that large caps or flexi caps oriented schemes may attract higher flows in the future".

Before the outflow in December 2023, the category attracted Rs 307 crore in November and Rs 724 crore in October.

Overall, equity schemes saw an inflow of 21,780 crore in January this year making it the highest monthly infusion in nearly two years. The latest flow was about 28 per cent higher than inflows of Rs 16,997 crore in December.

Besides, mid-cap oriented funds and small-cap focused funds continued to attract investors with inflows of Rs 2,061 crore and Rs 3,257 crore, respectively.

Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd, said that in FY2024, until December, the total outflow hovered around Rs 4,949 crore from large- cap. During the same period, small-caps received inflows of Rs 34,103 crore.

For FY2024, large-caps have delivered an absolute return of 28 per cent, whereas small-caps delivered over 60 per cent. Given that this would have created portfolio allocations biased towards mid and small as well as huge run- up in small relative to large, allocations moving towards large-cap is justified, he added.

"With mid-caps at 15 per cent and small-caps at 20+ per cent premiums, investors are realising the considerable valuation gap with the large-cap segment, and accordingly making adjustments to their investments," Gopal Kavalireddi, Vice President of Research at FYERS, said.

The growing interest in large-cap funds could be seen in the rising number of investor folios, both on a month-on-month and yearly basis.

Year-on-year, folio numbers surged by over four lakh to 1.33 crore in January, while on a month-on-month basis, there was an increase of 1.45 lakh folios.