Where’s the money flowing? India’s passive MFs surpass Rs 10 lakh cr in AUM | Personal Finance

The mutual fund industry in India has witnessed a phenomenal surge in the past decade, with assets under management (AUM) growing over seven times to Rs 61.2 lakh crore in June 2024 from from Rs 8.3 lakh crore in December 2013. A recent study by Motilal Oswal Asset Management Company (MOAMC) titled “Where the Money Flows”  reveals that Passive Funds AUM has grown to Rs 10.2 lakh Crore with 17% of total market share, while AUM of Active Funds stands at Rs 50.9 lakh crore, as of June 2024.

Source/Disclaimer: AceMF, AMFI, MOAMC. Data as of 28-Jun-24.

As per the study, Equities take away majority of the share with 59.75% of total AUM, followed by 26.95% in Debt, 8.85% in Hybrid and 4.44% in others.

Here are the key highlights of the report:

• 
  AUM has grown from Rs 8.3 lakh crore in December 2013 to Rs 61.2 lakh crore in June 2024.
• 
  Passive funds have seen a significant increase, accounting for Rs 10.2 lakh crore in AUM, representing 17% of the total market share.
• 
  Equities continue to be the primary asset class, holding 59.75% of total AUM.
• 
  Debt funds account for 26.95%, while hybrid funds hold 8.85% of the total AUM.

Debt funds take front seat

Quarter in Review: 

• 
  Mutual funds received a total of Rs 325,000 crore in inflows, with nearly equal contributions from equity and debt funds.( 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. 
• 
  35 new schemes were launched, collectively garnering over Rs. 27,000 crore.
• 
  Active funds continue to dominate the market with an 83% market share, while passive funds hold 17%.
• 
  Broad-based and arbitrage equity funds were particularly popular, attracting over 73% of net equity inflows.
• 
  Liquid and money market funds led the way in debt fund inflows.
• 
  Hybrid Fund Resurgence: Multi-asset, equity savings, and balanced advantage hybrid funds witnessed significant inflows.
• 
  International Fund Outflows: Investors were cautious about international funds, leading to net outflows of Rs 1.5 crore.
• 
  In the Equity segment, Broad Based and Arbitrage funds stole the spotlight, capturing over 73% of the net inflows in the equity category
• 
  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.
• 
   The last quarter continued the resurgence of Hybrid funds with Multi Asset funds in the lead with net inflows of 85000 crore, followed by Equity Savings (3.2K CR) and Balanced Advantage (2.6K CR) funds.

At 73% of market share, Arbitrage & Broad Based funds took away the lion’s share of net inflows in June quarter.

• 
  Broad Based funds in both Active & Passive Equities attracted significant net inflows as equity markets continued to rally in the last quarter. 
• 
  Active Equity Funds: Thematic funds attracted Rs 20,000 crore, while arbitrage funds garnered Rs 30,000 crore.
• 
  Passive Equity Funds: Factor funds, particularly momentum-based funds, received Rs. 5,000 crore in inflows.

Multi-Cap & Flexi Cap lead to major contribution in the Broad Based segment

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  Investors continued to bet on Broad Based funds across all the categories with Rs45,000 crore net inflows in active and Rs 32,000 crore net inflows in passive in Q1FY25.
• 
  Flexi Cap, Mid Cap, Small Cap, Multi Cap, and Large & Mid Cap funds picked up steam, attracting net inflows of more than Rs 7,000 crore  each.
• 
  Investors continued to prefer Passives for their Large Cap allocations with the category receiving greater than 95% of all net inflows in passive segment.

Infrastructure category lead the Thematic segment

Investors also took to bet on Active Thematic funds highlighting with Rs 20,000 crore net inflows. Infrastructure, Manufacturing, Business cycle funds and PSU picked up steam, attracting net inflows of more than Rs 2,000 crore each. Passively managed thematic funds of PSU Category saw highest net inflows among passive segment in thematic.

Active Constant Maturity and Passive Target Maturity drive net inflows

As per study, Debt Funds faced substantial net inflows in the June quarter across both Active and Passive funds. While, Constant Maturity funds dominated the inflows making up over majority of flows in Active Debt Category followed by Gilt and Corporate Bond funds with some inflows.

Liquid & Money Market funds drive Estimated Net Flows

Liquid & Money Market funds drove the category net inflows (>85%), followed by Overnight funds, in the June quarter. 

Low Duration and Ultra Short funds saw net inflows greater than Rs 10,000 crore. 

Generally, investors use debt funds with maturity up to 1 year to park excess cash in the short term leading to high volatility in inward & outward flows. 

Multi Asset funds continue to see strong traction

Multi Asset funds led the Hybrid category, securing 60% of the net inflows, followed by Equity Savings with 23% and Balanced Advantage at 17%. Aggressive & Conservative Hybrid funds saw net outflows of 0.3 k Cr each. Multi-Asset Category saw the net flows close to Rs 8,500 crore.

No country for International Funds

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  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 1,000 crore, with a relatively majority in Broad Based Category. 
• 
  Despite the overall positive sentiment towards Indian mutual funds, international funds witnessed a modest net inflow of Rs. 500 crore during the quarter.

First Published: Aug 21 2024 | 2:39 PM IST