“When the stock market experienced a downturn in December, retail investors became overly optimistic and greedy.”
Stock market: Taking advantage of the temporary market correction, increased selling by foreign portfolio investors, and heightened volatility, retail investors significantly increased their purchases of equity mutual funds in December 2024.
Inflows into equity mutual funds surged to ₹41,156 crore, up from ₹35,943 crore in November, with small-cap, midcap, and thematic funds leading the way. Investors continued to invest through systematic investment plans, with purchases totaling ₹26,459 crore in December compared to ₹25,320 crore in the previous month.
On the other hand, debt funds experienced outflows of ₹1.27 lakh crore, primarily due to quarter-end outflows from liquid, overnight, and money market funds, as well as uncertainty surrounding rate cuts.
According to data from the Association of Mutual Funds in India (Amfi), total average assets under management saw a slight increase to ₹69.33 lakh crore from ₹68.04 lakh crore in the previous month.
The market correction presented a favorable investment opportunity for investors, which they seized upon. This marked the 46th consecutive month of net inflows into the segment, as noted by Himanshu Srivastava, associate director at Morningstar Investment Research India.
All equity-oriented categories received net inflows during the month, with sectoral and thematic funds attracting the highest inflows of ₹15,332 crore, including ₹11,300 crore from new fund offers. In comparison, sectoral funds received ₹7,658 crore in November.
Midcap and small-cap funds, along with multi-cap funds, which have significant exposure to these segments, continued to attract strong inflows due to their impressive historical returns. Midcap funds received ₹5,093 crore, small-cap funds received ₹4,668 crore, flexicap funds attracted ₹4,731 crore, and multi-cap funds garnered ₹3,075 crore.
Low post-tax returns from debt funds and uncertainty regarding interest rate cuts have prompted investors to withdraw their money from these funds.
According to Juzer Gabajiwala, director at Venura Securities, debt funds have experienced significant outflows due to the perceived delay in interest rate cuts.
In contrast, arbitrage funds within the hybrid segment, which investors have traditionally used to earn higher returns than savings accounts, saw a decrease of ₹409 crore in investments. Some investors have shifted their funds to equity and hybrid funds to capitalize on market corrections.
On the other hand, multi-asset allocation funds, which offer a diversified portfolio of debt, equity, and gold, attracted inflows of ₹2,574 crore. Balanced advantage funds and equity savings funds also saw positive inflows of ₹1,596 crore and ₹451 crore, respectively.
As the issuance of sovereign gold bonds remained stagnant, investors turned to gold exchange-traded funds, resulting in inflows of ₹640 crore.
Overall, the investment landscape is shifting as investors seek higher returns and diversification in response to changing market conditions.
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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.