Fund Inflows Through Mutual Funds to Remain Volatile in the Near Term: Report
Mutual funds : New Delhi [India], March 14 (ANI) – Mutual fund (MF) inflows are expected to remain highly volatile in the short term, according to a report by financial advisory firm InCred Equities. However, the long-term outlook remains positive, supported by increasing retail participation, growing awareness of market fluctuations, and disciplined investing habits.
The mutual fund industry has faced significant fluctuations in recent months, with the overall Assets Under Management (AUM) declining by 1% month-on-month in February 2025, settling at ₹68 trillion. This decline is largely attributed to softer equity fund inflows and heightened market volatility.
Global uncertainties, particularly concerns related to interest rate movements, geopolitical risks, and economic slowdown fears, have contributed to the turbulent sentiment among investors. As a result, new investments in mutual funds have been erratic, while new Systematic Investment Plan (SIP) registrations have shown a decline, reflecting caution among retail investors.
Rising Financial Discipline and Optimistic Long-Term Prospects
Despite the short-term instability, a key positive indicator is that gross SIP inflows have remained robust at ₹260 billion, signaling sustained investor confidence in systematic and disciplined investing.
InCred Equities highlighted that the recent market correction, particularly in small-cap and mid-cap indices, which have seen a sharp 14-18% decline so far in 2025, has led to more attractive valuations for select asset management company (AMC) stocks. This correction presents an opportunity for long-term investors to accumulate quality stocks at reasonable valuations.
“We expect the volatility to persist in the near term, mainly due to global events. However, we remain optimistic about the long-term growth of the mutual fund industry, driven by increasing geographic penetration and the rising popularity of MF investments, especially among young and mid-income investors,” the report stated.
Growing Retail Participation and Expansion Beyond Top Cities
One of the key growth drivers for the mutual fund industry is the increasing participation from beyond the Top 30 (B30) cities, where financial literacy and awareness about MFs are improving. With more retail investors from smaller towns entering the market, the mutual fund industry is expected to witness sustained inflows in the medium to long term.
Another significant trend is the shift towards passive investing, with Exchange-Traded Funds (ETFs) and index funds gaining traction among investors looking for low-cost diversified investment options. This shift is expected to further stabilize long-term fund inflows.
Financial Ratios and Key Market Data
| Metric | February 2025 | Change (MoM) |
|---|---|---|
| Total AUM | ₹68 trillion | ↓ 1% |
| Equity Fund Inflows | Moderate | – |
| Gross SIP Inflows | ₹260 billion | ↓ 1.5% |
| Small-Cap Index | ↓ 18% YTD | – |
| Mid-Cap Index | ↓ 14% YTD | – |
Key Takeaways
- Short-term market volatility is expected to persist due to global uncertainties.
- SIP inflows remain strong despite a minor decline in new registrations.
- Small-cap and mid-cap indices have corrected significantly, presenting attractive investment opportunities.
- Retail participation from smaller cities is increasing, supporting long-term industry growth.
- Mutual fund investments are expected to grow steadily in the medium to long term, driven by financial literacy, disciplined investing, and diversified product offerings.
Frequently Asked Questions (FAQs)
1. Why are mutual fund inflows expected to remain volatile in the near term?
Mutual fund inflows are affected by global economic uncertainties, interest rate movements, and geopolitical risks. These factors have led to cautious investor sentiment and fluctuations in new investments.
2. How much did the mutual fund industry’s AUM decline in February 2025?
The Assets Under Management (AUM) of the mutual fund industry declined by 1% month-on-month to ₹68 trillion in February 2025.
3. Are investors still investing in SIPs despite market volatility?
Yes, gross SIP inflows remained strong at ₹260 billion, though there was a 1.5% decline in new SIP registrations due to market uncertainty.
4. How have small-cap and mid-cap indices performed so far in 2025?
The small-cap index has dropped by 18% year-to-date, while the mid-cap index has fallen by 14% due to market corrections.
5. What are the long-term growth drivers for mutual fund inflows?
Factors such as increasing financial awareness, higher retail participation from smaller cities, rising popularity of passive investing, and disciplined SIP investments are expected to drive long-term mutual fund growth.
Conclusion
While mutual fund inflows are likely to remain volatile in the short term due to global uncertainties, the industry’s long-term outlook remains promising. With rising financial discipline, growing investor participation, and increasing investment avenues, mutual funds are set to play a pivotal role in wealth creation in the coming years.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.