In a recent study, Motilal Oswal Asset Management Company stated that the passive mutual fund industry in India has crossed a significant threshold, with AUM reaching Rs 10.2 lakh crore as of June 2024. The study, Where the Money Flows, stated that the growth has led to passive funds capturing 17% of the total market share in India’s burgeoning asset management sector.
In total, the mutual fund (MF) industry welcomed net inflows of Rs 325,000 crore — Rs 166,000 crore in debt, Rs 143,000 crore in equity and Rs 8 crore in Multi Asset), spearheaded by almost equal split between Debt and Equity funds.
The study noted this quarter saw the launch of 35 new schemes that collectively amassed over Rs 27,000 crore. Active Funds markets share at 83%, AUM grown to 50.9 Lakh Crore as of June 2024.
Top Highlights:
> Active Broad-based, Thematic and Arbitrage Funds Shine: In the Equity segment, Broad Based and Arbitrage funds stole the spotlight, capturing over 73% of the net inflows in the equity category.
> Among passive thematic funds, the PSU category saw the highest net inflows, despite its relatively small AUM.
> Debt Funds Face Inflows: Debt funds encountered significant net inflows, primarily driven by Liquid & Money Market funds (>85% of net inflows in this category), followed by Overnight funds. Passively managed Liquid and Long Duration funds saw significant net inflows, given their relatively small AUM.
> Traction continues in Hybrid Funds: The last quarter continued the resurgence of Hybrid funds with Multi Asset funds in the lead with net inflows of 8.5K crore, followed by Equity Savings (Rs 3.2K crore) and Balanced Advantage (Rs 2.6K crore) funds.
> International Funds Continue Pause: Investors increasingly shied away from international funds as they witnessed net outflows of 1.5K CR, predominantly driven by outflows from active funds.
The report noted during the quarter, outflows from the International category occurred across categories, primarily attributed to the RBI threshold, which led to few restrictions on new investments in such schemes.
Actively managed International Funds saw net outflows of Rs 1k Cr, with a relatively majority in Broad Based Category. Passively managed International Funds saw net inflows of Rs 0.5k Cr, with a relatively majority in Thematic funds.
> The Infrastructure category led the thematic segment, with active thematic funds attracting net inflows of Rs 20,000 crore.
> This surge was fueled by investor interest in Infrastructure, Manufacturing, Business Cycle, and PSU funds, each drawing more than Rs 2,000 crore in net inflows.
Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company Ltd said, “The rise of AUM in India’s asset management industry reflects the country’s dynamic and rapidly evolving financial landscape. As more investors enter the market, the industry is poised for sustained growth. For asset managers, the challenge will be to innovate and adapt to the changing needs of investors, ensuring that they remain relevant in a competitive market. They need to stay agile, informed, and ready to embrace the opportunities and challenges that lie ahead.”
Pratik Oswal, Chief of Business Passive Funds, Motilal Oswal Asset Management Company Ltd said, “The financial markets are constantly evolving, and staying informed about where the money is flowing is essential for making sound investment choices. The latest “Where the Money Flows” report from June 2024 offers a deep dive into the current trends driving these movements, shedding light across categories attracting most interest from investors.”