Mutual fund inflows insufficient to lift markets: Manish Jain, Choice AMC

Manish Jain, Deputy CEO of Choice AMC has said that mutual fund inflows are not sufficient to lift the market alone. He added that domestic money sets the floor only, and not the ceiling.

Corporate earnings can absorb the recent RBI rate hike, but rising bond yields, US yields and rupee weakness pose risks, particularly for leveraged mid-sized borrowers, said Manish Jain, Deputy CEO of Choice AMC in an interview with Abhinav Ranjan. He sees better value in the Nifty LargeMidcap 250 index, which trades at a lower valuation than the Nifty Midcap 150. Edited excerpts:

 

Mutual funds continue to attract inflows despite the market weakness. How sustainable is this trend? And are domestic inflows enough to offset continued selling by FIIs?

 

Sustainable, yes. Sufficient to lift the market, no. September brought a record SIP book of ₹32,490 crore and ₹38,307 crore of equity inflows. But in a month, the benchmark Nifty fell about 6 per cent. Last week domestic institutions bought ₹30,313 crore against FII selling of ₹30,294 crore: a near-perfect offset. FPIs have sold about ₹3 trillion this year (NSDL), ₹44,000 crore of it in October so far; DIIs crossed ₹5 trillion by early August. The caveat: domestic money sets the floor, not the ceiling. Industry AUM fell 5.1 per cent in September, on market losses and ₹1.83 trillion of debt outflows, and only about 56 per cent of FY26's gross SIP stayed net. Investor habit, not headlines, decides durability.

 

 

Mid and smallcap funds outperformed in 2026. Do you see more upside in these segments? What makes these two segments beat largecaps?

 

Over 12 months to September, Midcap 150 returned +4.6 per cent and Smallcap 250 +7.2 per cent, against −7.1 per cent for the Nifty 50 (total return); three-year CAGRs are 13.7 per cent and 14 per cent versus 6.1 per cent. Why: earnings (Motilal Oswal's coverage shows Q1 FY27 midcap profit growth of 23 per cent against 21 per cent for large caps) and thin foreign ownership: you can't be sold by FPIs who aren't there. Add SIPs: small and midcap funds took ₹16,873 crore, 44 per cent of September's equity inflows. CHECK Stock Market LIVE Updates

 

More upside? Selectively. On NSE P/E of 28.4x and 34.5x against 19.4x for the Nifty, they carry premiums of 47 per cent and 78 per cent; three months atop the inflow chart is momentum with a SIP mandate. The better value sits between the segments: the Nifty LargeMidcap 250 trades at 22.9x, 18 per cent above the Nifty but 20 per cent below the Midcap 150, with one-year volatility of 14.7 per cent against 16.2 per cent for midcaps. It lost 0.4 per cent over a year in which the Nifty lost 7.1 per cent. Pick stocks; don't chase the index.

 

RBI has shifted towards a tighter monetary policy stance. How do you see higher interest rates impacting corporate earnings? Also, shed light on the debt mutual funds.

 

The 25 bps hike to 5.50 per cent, the first since February 2023, with a shift to "calibrated tightening," is small in arithmetic but marks the end of the easing cycle. RBI sees FY27 CPI at 5.2 per cent, GDP at 7.1 per cent. For aggregate earnings, 25 bps is a rounding error; what matters is the 10-year G-sec at ~7.4 per cent (a three-year high), US yields and the rupee, which hit leveraged mid-sized borrowers hardest. Consensus earnings growth for the top 200 companies is 9.2 per cent in FY27 and 17.2 per cent in FY28 (NSE, LSEG), so earnings can absorb a hike.

 

What are your AUM growth targets for FY27 and which areas will drive growth in AUM over the next 3-5 years?

 

Ans: Our anchor is ₹10,000 crore. ₹10,000 crore is ~0.12 per cent of today's ₹82.64 lakh crore industry. Small on paper, but the first ₹10,000 crore is the hardest. FY27 is about building a credible shelf (Nifty 50 and Nifty Next 50 index funds, Gold ETF, Overnight Fund, with Large & Mid Cap next). Over 3–5 years: debt, passive, actives, SIF, ETFs, FoFs - basically give a solution where volatile markets create demand for built-in discipline.

 

Speak briefly on your expansion strategy and how important B30 cities will be in driving the investor base.

 

Asset-light. We are not opening AMC branches; we use Choice Group’s existing network for physical reach. B30 is where the growth is: it is 19.1 per cent of industry AUM (July, AMFI-Crisil), up from 18.8 per cent in March, and equity makes up about 66 per cent of B30 assets against 40 per cent in top-30 cities. Retail-heavy, SIP-led, equity-hungry: that is our customer.

 

What challenges do you face in scaling up the business and what changes do you want to see or regulators bring in to address them while cementing investor trust at the same time?

 

Scale is the first challenge: a new AMC carries a full compliance, technology and distribution cost base on a small AUM. New expense framework is good for investors, but tougher on sub-scale margins. Second, shelf space: incumbents have decades of distributor relationships. Third, behaviour: investors chase last year's winner, then stop SIPs after a drawdown. What would help: a time-bound, proportionate compliance relief for new AMCs; digital-first onboarding and KYC portability to cut acquisition costs; plain-language risk communication at point of sale for high-volatility categories. 

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