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“Surge in investor interest in certain specific funds such as Sectoral and Thematic Funds, launch of significantly higher number of NFOs across some of these funds coupled with the growing popularity of SIPs among retail investors have been contributing to the surge in inflows into equity mutual funds. Indian mutual fund industry is expected to sustain inflows in 2025, supported by increased tech adoption and digitisation especially in smaller cities, and growing interest in sectors like technology, renewable energy, banking, and consumer durables,” said Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics.
The SIP contribution increased by 40.45% at Rs 26,459 crore in December 2024, as against Rs 18,838 crore in January last year. The total number of folios grew by 32.70% at 22.50 crore in December 2024, as compared with 16.96 crore during the beginning of last calendar year. The total mutual fund industry AUM stood at Rs 66.93 lakh crore in Dec 2024, up from Rs 52.74 lakh crore in Jan 2024, according to data sourced from MFI360Explorer.
Source: MFI360ExplorerWhile large cap funds are likely to attract steady inflows due to their stability and consistent returns, mid and small cap funds may witness increased inflows as investors continue with their quest for higher returns, Kumar said. Sectoral and thematic funds focusing on high-growth sectors like technology, healthcare, and infrastructure are expected to remain popular. This apart, hybrid funds, which invest in a mix of equity and debt thereby offering a balanced approach, are likely to attract investors seeking moderate risk and steady returns, he added.
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As many as 239 NFOs were launched in 2024 mobilizing close to Rs 1,18,519 crore.
However, factors such as rising inflation, uneven or below-average monsoons and volatility in global crude oil prices could pose some challenge to the growth of the MF industry, Kumar said.
“Rising inflation can lead to higher operating costs for companies, affecting their profitability and, consequently, the returns on mutual funds. Poor monsoon can impact agricultural output, leading to economic instability and affecting market performance while fluctuations in crude oil prices can increase costs for various sectors, impacting the overall market and mutual fund returns. This apart, geopolitical tensions can disrupt oil supplies, leading to higher prices and increased market volatility,” he pointed out.